How to Use a Credit Card Responsibly

Max Anderson

HonorBank_OUW_HowToUseCreditCardResponsibly_BlogHero_October_20190927A credit card can be a valuable tool, allowing you to consolidate purchases in one place and earn valuable rewards for the money you spend. But along with the benefits comes the potential for significant financial troubles. Current research shows that 55 percent of Americans with credit cards are carrying debt on those cards.

With high credit card interest rates, that debt can cost a lot.

We’ve gathered our best advice for how to properly use a credit card in a way that limits the amount of money you will spend on interest, while also helping to build your credit score.

Getting Started with Credit Cards

The best way to responsibly use credit cards is to get started with good habits from the very beginning. Credit cards without an annual fee won’t cost you anything if you pay the balance in full each month, however, once you start carrying a balance on your card the interest adds up quickly. At that point, it can become challenging to pay off the card completely.

For some people, one of the most challenging aspects of credit cards is knowing your balance and making sure you’re able to pay off purchases before you’re charged interest on that balance. For that reason, we recommend starting credit card use with small purchases. For the first few months, make only a few manageable purchases each month (such as one date night out) and get into the habit of paying that balance when it’s due.

How to Use a Credit Card Responsibly

Once you’ve settled into a good rhythm of paying off your credit card every month, you can start making more purchases on the card.

Follow these seven tips to ensure you’re using the credit card responsibly:

  1. Pay off your balance every month. Not carrying a balance on your card means you won’t be paying interest, which makes the credit card work in your favor.
  2. Monitor your activity. Know what’s happening on your card so you know you’re able to make the payments and can call out fraudulent purchases if they happen.
  3. Don’t purchase things you can’t afford. A credit card shouldn’t be used as a loan. Keep purchases within what you know you’re able to pay off and don’t use your credit card to buy things you want but can’t afford.
  4. Make sense of your spending. If you’re able to make all purchases on one credit card, it can be easy to know exactly how much money you’re spending each month and where that money goes.
  5. Get rewarded. Earning rewards is one of the biggest benefits of using a credit card. Choose a card that offers rewards that will be useful for your lifestyle and make sure to take advantage of them!
  6. Never skip a payment. Things come up, and making your credit card payments can become difficult at times. Be sure to always at least pay the minimum payment to avoid additional fees. That said, paying only the minimum balance should never become a habit.
  7. Make a plan if you can’t pay your credit card bill in full. If you aren’t able to pay the full balance at any given time, don’t let your balance spiral event higher. Make a plan to pay down the balance as soon as possible and stick to the plan.

How to Use a Credit Card to Build Credit

We often hear that having a credit card is a good way to build credit, but that is only the case if you’re using the card in the right way.

Consider these four tips to make sure you’re using your credit card in a way that will positively impact your credit:

  1. Keep your balance low. Credit scores take into account the percentage of your total credit limit that you’re carrying as a balance. Always strive to keep the balance on your credit card below 30 percent of your total credit limit.
  2. Pay your balance every month. Paying off your balance each month shows that you’re making responsible decisions and not spending more than you’re earning.
  3. Stick with your card. Keeping the same credit card for a long time shows a positive credit history and can improve your credit score. We recommend keeping credit cards open for the long haul rather than moving on to a new card every year.
  4. Limit the number of credit cards you open. While having available credit is a good thing, having too many credit cards open or opening and closing credit cards just to receive the signing bonuses can negatively impact your credit. It’s also much harder to keep track of balances and fraudulent charges when you have too many credit cards.

Ready to be a responsible credit card user? Explore the variety of credit card options available from Honor Bank.

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