How to Use a Credit Card Responsibly: 10 Actionable Tips

Written by Justin EstesReviewed by Nathan Brown, CFP®Updated: 19th Apr 2022
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Building credit and having a credit card are some of the most important financial moves you can make.

When you have a good credit score and a credit card that works for you, you will be well on your way to making your money work for you.

However, if you have researched credit cards in the past, you probably stumbled across some horror stories where people charge more than they can afford and end up in a mountain of debt.

Maybe you have some personal experience with credit cards that weren’t pleasant or know someone who has.

Thankfully, you can take some simple steps to ensure you are responsible while enjoying all the perks that credit cards offer.

>> More: How to Apply for a Credit Card and Get Approved

How to Use A Credit Card Responsibly

Let’s do a quick review of how credit cards work before diving into our ten steps. When you are approved for a credit card by a bank or other financial institution, you have access to a credit line to which you can charge purchases.

Since you are spending someone else’s money, you will need to pay it back on time. If you ignore your balance or don’t pay it off in full, you will start paying interest which can add up quickly.

Tip #1: Pay Your Bills on Time

Saving money on interest and managing your balance starts with paying your bills on time.

Missing a credit card payment will harm your credit score, and other lenders may not be willing to work with you in the future, and if they do, you will pay a much higher interest rate.

Set calendar reminders and schedule automatic payments if you can because these tools will help ensure you don’t miss or forget about payment.

Tip #2: Pay In Full Every Month

Paying your full balance every month will help you avoid interest payments altogether. Many consumers assume that having a credit card means they will have to pay interest.

This is an unfortunate misconception because it prevents them from enjoying the rewards and credit boost that responsible credit card use offer.

By paying your full balance each month, you will show the credit bureaus that you are a reliable borrower, which can eventually lead to a higher credit score and lower interest rates on future loans,

Tip #3: Take Advantage of Earning Rewards

If you’ve ever wondered how some people can travel the world or receive tons of cashback from their spending, it’s because of credit card rewards!

There are many different types of credit card rewards depending on your spending habits and financial goals.

Examples include rewards points that can be redeemed for hotel stays, miles which pay for flights, or straight cash back, which can be deposited into your bank account or applied to your balance.

There are so many rewards that the best approach would be to look at your bank statement and identify the categories you spend the most on.

For example, if you spend a lot on groceries, then a credit card that generates rewards for grocery stores would probably be a good fit.

>> More: Best Rewards Credit Cards

Tip #4: Actually Use Your Credit Card

What’s the point of getting approved for a credit card if you don’t use it?

It turns out that credit usage is an important factor in your credit score, and when you charge your credit card and pay it off consistently, it can help boost your credit score.

Tip #5: Monitor Your Spending

Credit cards are not free money. Although you can use them to pay for whatever expenses you want, you should keep an eye on your balance.

Most banks and financial institutions offer push notifications and mobile apps that alert you when your card is charged or if your payment due date is approaching.

Tip #6: Read Your Card’s Terms of Service

Although many credit cards are issued by reputable banks, reading the terms and conditions is still very important.

Different banks may or may not charge fees for foreign transactions, or they may

Tip #7: Know Your Credit Limit

Your credit limit dictates how much you can charge on your credit card. Entry-level, secured credit cards may have a limit as low as $500, up to $20,000 or more. Some charge cards don’t even have a specified spending limit. Why is your credit limit important?

It’s important because your card could be declined if you reach surpass the limit. If you find yourself with a smaller credit limit than your normal spending habits, you can call your financial institution and request an increase.

Tip #8: Monitor Credit Utilization

Credit utilization is a vital piece of your credit score. If you have $10,000 worth of available credit and you have a rotating balance of $5,000, your credit utilization ratio would be 50%.

If you want to have the highest credit score available to you, you should aim to keep your credit utilization below 30%.

>> More: How to Lower Your Credit Utilization Rate

Tip #9: Avoid Debt and Interest

As we mentioned in the introduction, debt and interest can take a heavy toll on your financial health.

One of the easiest ways to manage your debt is to keep track of your income and expenses.

When you only have a debit card, spending more than you have is difficult without over-drafting your account.

However, you can spend money on credit cards that you may not have on hand.

Treating your credit card like a debit card can help you avoid debt and spending more than you can afford.

>> More: How Do Cash Back Credit Cards Work?

Tip #10: Keep Your Card Balance Low

Whatever your credit limit may be, your goal should be to keep your balance low and preferably completely paid off every month.

Credit cards are known as revolving credit lines, which is a fancy term for a loan that you can keep adding to, even as you are paying it down.

Most credit cards have a very small required minimum monthly payment, enabling you to meet the regular payment requirement on your credit score.

However, if you only pay the minimum, your debt can balloon quickly, especially with compounding interest.

What Are the Benefits of Using A Credit Card Responsibly?

Using a credit card responsibly enables you to boost your credit score, qualify for lower interest rates, and even travel the world for free if you use a rewards credit card.

Bottom Line: How to Use A Credit Card Responsibly

Whether you are considering applying for your first credit card or are trying to improve your financial habits, these tips will certainly point you in the right direction.

When you have great credit card discipline, many other facets of your financial health will also improve.

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Justin Estes
Justin Estes

Justin Estes is a Senior Personal Finance Writer who is a recognized small business accountant, consultant, and credit card expert. His background in accounting and finance led to a passion for helping people make the most of their money and matching them with financial products that enhance their lifestyle. Justin attended Charleston Southern University where he double-majored in Finance and Accounting. Justin’s areas of expertise are credit cards, small business finance, accounting, and taxes.