Credit Cards

I made this mistake with my first credit card and it cost me thousands

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A missed credit card payment came at a high cost.

Key points

  • I signed up for several credit cards when I was in college.
  • I ended up missing a payment because I had too many cards.
  • This cost me thousands of dollars.

When I was in college, I signed up for my first credit card. It was a card from a clothing store that I liked.

After opening the original card, I found that I liked being able to charge purchases and earn rewards. As a result, I subsequently signed up for several more. At the time, there were no protections to prevent credit card companies from marketing to college students, so I found myself with a wallet full of cards.

Unfortunately, this led me to make a huge mistake with the first card that had long-term consequences in terms of my ability to borrow at an affordable rate. This is what happened.

This was the big mistake I made with my first credit card

After my first credit card inspired me to open several more, I found myself with more cards than I could comfortably handle. As a result, I ended up forgetting that I hadn’t made a payment on that original card even though I had made a purchase on it. And my payment was seriously late, more than 60 days.

The credit card company reported my late payment to the credit reporting agencies, and they also charged me late fees and interest for two months. The record of late payments stayed on my credit report for years, even after I stopped using that store card. And this came at great cost.

This is how my mistake ended up costing me thousands of dollars

The initial cost of late payments came to $70 for two late fees, as well as interest charges on purchases I made. Since I didn’t pay my statement in full by the due date, I paid interest for the two months I had a balance before I realized I was late.

These costs were high enough, but they were only the beginning of the expenses associated with my big mistake. Since I didn’t have much of a credit history at the time I fell behind on my payments, the fact that I was seriously late on my card payments had a big impact on my credit score. It dropped over 100 points, leaving me with a score below 700.

Although I never repeated the mistake I made with my first card, it took me a long time to get my score back to the level where it was considered excellent. And during the time that late payment was dragging down my score, I took out a car loan and a mortgage. While it’s impossible to know exactly how much higher my rates were, I definitely wasn’t offered the most competitive rates as a result of the fact that my credit score was lower than it should have been.

Since both mortgages and auto loans are large debts that are paid off over several years, the interest rate difference resulting from my initial late payment cost me thousands of dollars. Since I never want to find myself with a lower credit score again, I made sure I didn’t make a similar mistake in the future by setting up automatic payments and keeping my number of cards to a manageable level.

Unfortunately, this initial mistake I made shows the extent of the effects of a single credit card mistake. Hopefully others can avoid my mistake by making sure to take extra care with the first card, as it plays a huge role in building your credit history.

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