How to properly use a credit card


If you’re new to credit or just don’t know how to use a credit card, sit back and get …

If you’re new to credit or just don’t know how to use a credit card, sit back and get comfortable. You will have credit clarity in about four to six minutes, depending on how fast you read this.

And listen, don’t feel bad about your lack of literacy. You are not the only one who does not understand the whole process or what it even means to use credit cards responsibly. Credit is not intuitive, so you weren’t born with an innate knowledge of how it works.

So, read on, and I’ll show you everything you need to know about responsible use of credit cards. Up to the front:

– Build credit with a credit card.

– Create a budget.

– How to choose the right credit card.

– Read the fine print.

– How to avoid paying interest on credit cards.

– Check your credit card account online.

– Do I have to use a credit card for everything?

Build credit with a credit card

When you learn how to use your credit card correctly, you will see your creditworthiness improve. To go faster, use less than 10% of your credit limit during the month, pay off the balance in full when due, and track your online activity.

Don’t forget to pay all of your bills on time, not just your credit card bill. It takes time to build (or rebuild) credit, so if you’re new to it, be persistent and patient. Over time, you will develop a great credit rating.

Create a budget

You have to start with a good financial foundation. Think of it like the concrete foundation for a new house. If there’s a crack in the foundation, your home is in trouble before you even move in.

Likewise, you shouldn’t even get a credit card until you’ve budgeted and had a way to track your spending. Once you’ve established your budget, you can decide what expenses you want to put on your credit card.

[READ: Best Credit Cards for Young Adults.]

How to choose the right credit card

The type of card you need depends on your situation. Take a look at this brief overview of the types of credit cards and you will understand what I mean.

Secure credit card. It is a good choice for people new to credit or rebuilding their credit history. You need to make a bank deposit to “secure” the card, but the credit card you receive looks like an unsecured credit card.

Secured credit cards tend to have higher percentage rates and annual fees, but there are some great secured credit cards that will help you build credit. Once you prove that you can use a secured credit card responsibly, you will qualify for an unsecured credit card with better terms.

Student credit card. If you are enrolled in college, you may be eligible for a student credit card. Credit requirements are more flexible for a student credit card because it is designed for someone new to credit. However, if you are under 21, the Credit Card Act 2009 states that you must be able to prove that you have sufficient income to pay off your debts.

Plain vanilla credit card. This is a credit card that does not offer any rewards. Since this is a no-frills card, it usually doesn’t have an annual fee. This type of card is often a good way to stay in the credit water without having to keep up with the rewards.

Rewards credit cards. This category covers cards with general general rewards, category rewards, travel rewards, airline miles, cash back and much more. These cards generally require a good credit history, so this may not be the card you are starting out with.

When you feel ready for a rewards card, take a look at the spending within your budget. If you spend a lot in one area, consider a credit card that offers rewards in that area.

For example, let’s say your gasoline expenses total $ 200 per month. You might decide to get a credit card with gas rewards. And your budget for the card is $ 200. Since you keep track of your spending, you’ll know if you’re at risk of going over the limit. Some credit cards allow you to use your rewards as a credit on your statement, which helps you pay off your balance.

Read the fine print

No one likes to read disclosure statements, but it is required reading if you want to use credit cards. Pay close attention to the Schumer box, which displays rates and fees, such as APRs (purchase, balance transfers, and cash advance), grace period, annual fees, overseas transaction fees and any balance transfer and cash advance fees.

You can find it on the card home page by clicking on a link titled “Fares and Fees”, “Pricing and Terms” or similar wording. Sometimes the link will take you to a new page, but there are also issuers that place this data at the bottom of the home page. In other words, it may take some effort to find it, but you really need to read it.

One of the most important information is the length of the grace period. This is the period during which you have to pay off your balance without paying interest. It is usually between 21 and 25 days. Don’t get a credit card without a grace period. And yes, they do exist!

[Read: Best Student Credit Cards.]

How to Avoid Paying Interest on Credit Cards

If you use a credit card correctly, you won’t have to pay interest. This is why it is so important to track your spending and avoid overspending. If you keep a month-to-month balance, you’ll pay interest on your purchases.

If you make it a habit, you will end up with credit card debt. Don’t let this happen!

Check your credit card account online

There are two reasons why you should frequently monitor your account. The first reason is to make a concrete connection with your credit card purchases. It’s easy to be out of touch with financial reality when you’re not handling cash. So when you see the transactions online, it reinforces the fact that you have spent the money.

The second reason is to look for fraud. Make sure to research any purchases you haven’t made. Sometimes a scammer will use the account for a purchase under $ 10, so be sure to watch all transactions. If you see anything suspicious, follow the steps outlined by the Federal Trade Commission to report fraud.

It is also a good idea to check your annual credit reports. You are entitled to a free annual credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Examine these reports for errors or accounts you haven’t opened. Sometimes a thief opens a new account in your name, and checking your credit report is the best way to find out.

[READ: Best Credit Cards for No Credit.]

Should you use a credit card for everything?

Some people use their credit cards to pay the majority of their bills in order to maximize their rewards. This can be a great way to rack up rewards quickly, but there is also a down side to this approach. Unless you make two payments during the month, the balance reported to the credit bureaus can be high.

When your credit usage is high, it can lower your credit score. Using your credit card for all expenses can also be risky if you are not in a good financial position. Rewards credit cards often have higher APRs than regular credit cards. So make sure you don’t carry a balance from month to month. It’s a good idea to make sure you have a solid emergency fund in case something unexpected happens.

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How to properly use a credit card originally appeared on

Update 7/14/21: This story was posted on an earlier date and has been updated with new information.


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