You Won’t Believe the Terrible Credit Card Habit Millionaires Have

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Many millionaires make a surprising mistake with their credit cards. Learn what it is and why this credit card habit is one you should avoid. 

It’s easy to assume that wealthy Americans generally follow good financial habits. When someone has built a net worth of $1 million or more, you’d probably expect that they got there in large part because of how they manage money.

This is often true, but it doesn’t mean they do everything right. In fact, there are some surprising areas where millionaires have poor financial habits. Case in point, The Ascent’s recent study on wealthy Americans’ credit card habits found that two-thirds of millionaires are making a huge mistake in how they pay their credit card bill.

Millionaires’ worst credit card habit

Most millionaires (66.93%) don’t consistently pay the statement balance on their credit cards. When asked how often they pay the statement balance, here’s what they said:

33.07% said every month22.20% said not every month, but often24.80% said a few times a year19.93% said almost never

Why is that a problem? It’s because when you don’t pay your credit card’s statement balance, the card issuer can charge interest on your balance.

That’s something you’re better off avoiding whenever possible, because most credit cards have very high interest rates. That has been true for years, but rates have also gotten much higher in the last year. Currently, the average credit card APR is over 20%. At that APR, a $5,000 balance would cost about $1,000 per year in credit card interest.

To avoid interest charges, you just need to pay the statement balance every month. This also helps you stay out of credit card debt.

Why don’t millionaires pay off their credit cards?

It’s better financially to pay off your credit card in full. You’ll save on interest, which is an extra expense you don’t need. And it would seem like millionaires could pay off their credit cards. So, why don’t they? There are a few explanations.

Millionaires might not always be able to pay off their credit cards. Just like anyone else, they can overspend and end up with an expensive balance. Even people with a net worth of $1 million or more usually don’t have nearly that much cash on hand. It’s tied up in property, investments, retirement accounts, and so on.

Potential evidence supporting this theory is that over 50% of the millionaires surveyed said they had maxed out a credit card. Maxing out a credit card is often a sign of overspending. It could be that when millionaires don’t pay off their credit card, it’s because they don’t have enough money accessible in the bank to do so.

There are also situations where people carry balances on their credit cards even when they don’t need to. Sometimes, it’s because they prefer not to use up too much of their savings. Others, it’s because they believe the myth that carrying a balance is good for your credit score (it’s not). Millionaires can make these kinds of mistakes, just like non-millionaires.

Wealthy Americans have plenty of valuable financial habits that are worth emulating, such as living below your means and investing regularly. But this credit card habit definitely isn’t one of them. Instead, make it a habit to always pay your credit card bill in full. If you think you won’t be able to do that because of some big expenses coming up, look into 0% intro APR credit cards so that you can avoid costly interest charges.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More