9 Useful Tips on How To Use a Credit Card Responsibly

A credit card gives you access to the funds you can borrow to pay for purchases and services. Credit cards look just like debit cards - pieces of plastic you can swipe or insert in a credit card reader to pay your bill. But, unlike debit cards, which are funded with your own money, credit cards are a form of credit.

For this reason, each time you plan to purchase something with a credit card, you should use it responsibly because you’ll have to pay back the money you spent, plus a credit card interest.

How To Use a Credit Card Properly - 9 Helpful Tips 

One of the best things about credit cards is that they are really easy to acquire and use. Compared to applying for a loan or mortgage, applying for secured credit cards is a lot less stressful and time-consuming procedure.

The benefits of getting a credit card are diverse - from cashback rewards to credit score boosting - so it’s not a surprise so many Americans love them and have at least one in their pockets. Let’s see what you can do to make the best of them.  

Read your credit card terms and conditions

For responsible credit card usage, it’s essential to know all the details of the agreement between you and the financial institution issuing your credit card. Carefully read the customer agreement and get acquainted with the terms and conditions. 

You can find some of the information on the credit card company’s website, usually at the bottom of the homepage. But specific details about fees, payment dates, and borrowing limits can only be found in your agreement, so take your time and read it attentively before signing anything.

The most important thing to familiarize themselves with is the annual percentage rate. The APR is expressed as a percentage representing the total amount of money your credit card will cost you. It includes an interest rate and fees.

Some credit card companies offer credit cards with a zero-interest rate, which is a good option if you want to be free of paying rates during the introductory period and focus on earning rewards.  

Note that credit cards have different APRs for various types of transactions. There’s the APR for purchases, which usually differs from the APR for balance transfers and cash advances. 

Stay up to date with your monthly statements 

Responsible credit card use is impossible without monitoring your credit. Each month, your bank will send a monthly statement to your email or mail address. It’s like a report that shows all the changes and transactions on your credit card during one billing cycle.

For the sake of your healthy financial life, you should learn how to read a credit card statement and check those reports regularly.

Here, we’ll list the most important elements of a monthly statement. Understanding them will enable you to use your credit cards in a proper manner:  

• Allowed credit limit
• Credit card balance
• In-store and online purchases made during one billing cycle
• The minimum payment you need to make
• Payment due date

Your monthly statement will remind you of the last day to pay your debts without interest and of the minimum amount you need to pay each month. Thoroughly checking your card statement is also vital in spotting any suspicious activity on your account.

If you find a purchase you didn’t make listed on your statement, you should immediately contact your bank and report unauthorized activity on your credit card. 

Make regular monthly payments

Missed payments are the main reason some consumers get into debt, which, at some point, can be so large that they need to get a loan or enroll in a debt consolidation program to pay off their credit card balance.

To avoid this scenario and keep your finances in good shape, make timely payments each month. Some credit card companies offer mobile apps with features that help you manage your finances by setting reminders or scheduling automated payments every month. 

Pay more than the minimum 

Timely minimum payments are a sine qua non if you want healthy finances, but the credit card company will also charge interest on the balance you transfer to the next billing cycle. The lesser that balance, the lower the amount of interest you’ll end up paying. 

Try not to reach your borrowing limits

Once you apply for a credit card, the credit card company will set your borrowing limit. It’s calculated based on your credit history, credit score, and your income. The better your finances, the higher your credit card limit.

However, the best way to use a credit card is not to spend all the funds available to you because this can affect your credit utilization ratio. The credit utilization ratio is the percentage of the available credit you use. Keep it low if you want to have a good credit score.

According to the Consumer Financial Protection Bureau, you should use up to 30% of your credit. If, for example, your borrowing limit is $1,500 per month, using just $450 or less of that amount each month will keep your credit utilization ratio healthy. 

Look for a credit card with rewards 

Reserved only for consumers with an excellent credit score, credit cards with a reward program are another example of using a credit card in a smart way. Cash back cards, or cards that help you earn airline miles or discounts for specific purchases, are a good solution for consumers who use their credit cards regularly. 

Use your credit card to build your credit score

By paying full monthly balances on time and spending less than your credit limit, you can boost your credit score in just a couple of months. Banks and other credit card issuers regularly send reports to the three credit bureaus, so you can track and monitor your credit score to check the improvement.

Even if your credit score is 600 or less, you can qualify for a credit card with bad credit and use it to improve your score. Once again, the best way to build your credit score is to pay your balances on time. 

Spend money wisely

Once you get your credit card, decide how you are going to use it. Look at it as emergency funds. For example, if your car suddenly breaks down, you’ll have your credit card to cover the expenses. Just make sure you can cover the credit card balance next month.

Report a missing credit card 

If you lose your credit card, it’s essential to report it as soon as possible to the credit card issuer. The credit card company will block your old card and replace it with a new one. The same applies if you think that someone stole your credit number, not your physical card.