Credit cards are definitely powerful tools and can give you a lot of freedom and flexibility in regards to your finances. Of course, if they’re used incorrectly, they can quickly turn from a powerful tool into a liability. If used correctly, they can help you finance large purchases, buy things without having the cash on hand, and get rewarded for spending.
To help you learn how to use credit cards correctly, we’ve compiled this list of 7 ways to use a credit card. We hope you enjoy it!
7. Use them for big purchases
Since credit cards will give you rewards (usually in the form of points or cash back) it can be smart to use them for large purchases. Doing this will give you the quickest route to earning those rewards. However, there are two things to be aware of when doing this.
- Don’t go over your credit limit. Your credit limit is the max you’re allowed to buy using a credit card. Spending too much can lead to fees or hurting your credit score.
- Don’t spend money that you don’t have. We will examine this further in detail later. However, it’s very important to not buy something with a credit card just because you can. If you don’t have access to cash to pay something off in full, don’t buy it with a credit card.
6. Do the research beforehand
There are lots of different cards you can choose from. Pretty much every major bank will have one (or a few) and they all have different benefits. It’s very important to compare all of the different cards available to see which one is best for you.
It’s also a good idea to visit a few different banks to see what kind of things you qualify for. For example, going to a new bank and expressing interest in a credit card might inspire them to offer you some type of incentive to sign up. Usually, these incentives are free cash if you spend a certain amount. That’s definitely worth asking about!
5. Get rewards that are valuable for you
As we mentioned, credit cards offer all kinds of different rewards. For example, some cards will offer you cashback, some will offer travel rewards, and some will offer points that can be used to buy things. While you’re looking around, think about what types of rewards are valuable for you.
For example, if you don’t spend a lot of money on groceries then it doesn’t make sense to sign up for a card whose main selling point is 3% cashback on groceries. Alternatively, if you love to travel and spend a lot of money on plane tickets, it’s probably worth looking into a travel rewards card.
4. Use it for everything
As long as you’re being responsible and always have cash in a checking account to cover your bill, there is no reason why you shouldn’t use a credit card for everything. Think about it, if you use your credit card for everything then you’re basically getting paid (in the form of rewards) for all your normal spending. Not a bad situation!
If your credit limit isn’t very high, spend a few months to a year paying off your card in full. After about a year’s time, you can go in and request a higher credit limit. When you do this, point to your history of paying off your bill.
3. Only have 1-3 credit cards
There’s really just no need to have any more than this. Any more than 3 cards and it starts to become difficult to keep track. This can be when trouble because you lose track of which cards you’ve been using and which ones you need to pay. This leads to fees or racking up high interest on cards where you might not have even realized you had a bill.
1-3 credit cards allow you the flexibility and utility you’ll need. Additionally, this will allow you to take advantage of different rewards programs.
2. Pay it off in full each month
This definitely one of the most important rules on this list. Each month when your credit statement is due, make sure that you’re paying the full balance. If you don’t you’ll end up paying tons of additional money in interest. This is what credit card companies want and how they make their money.
If you’re forgetful, you can even set up automatic payments to go out at a scheduled time. This is why our #1 rule is so important.
1. Don’t spend money that you don’t have
The #1 rule of having a credit card is to not spend money that you don’t have. This is what credit card companies hope you will do so they can keep you in debt and paying them interest. It is critically important to know how much cash you have on hand at all times to make sure you can pay off any credit card at a moment’s notice.
We know that it can be tempting to swipe first and worry later but it’s also important to be responsible. Credit cards are a valuable tool that can help you make purchases and build credit. However, like a drunk driver behind a wheel, they can also lead to disaster. Be smarter than other people and don’t spend money that you don’t have! We hope that you found this list of 7 ways to use a credit card valuable! If you’re interested in learning or reading more please subscribe below to get alerted of new posts