How to Use a Credit Card Responsibly

Some financial experts will tell you that credit cards offer more risk than reward. Although it’s true that credit cards carry high interest rates that can become a problem if spending goes unchecked, there are many ways to use credit cards responsibly—and in ways that can actually improve your financial situation.

When used responsibly, credit cards can help you pay your bills on time, track your spending, prevent fraud, and receive money-saving benefits through travel rewards and other cash-back incentives. Here are six ways to make sure you’re using your credit cards wisely.

1. Track your spending closely when using credit cards.

Unlike paying for everything in cash, credit cards make it easy to track all of your purchases through both your online statements and a connected money management tool that categorizes your spending across your credit cards, debit cards, and checking accounts.

When making purchases with a credit card, it’s easy to lose track of your spending or to pay less attention to the amounts you’re spending compared to cash or other forms of payment. A money management tool can help address this problem, giving you up-to-date information about how you’re using your credit cards overall and on a per-category basis.

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2. Always pay off your balance in full.

The biggest risk of credit cards is that you may find yourself unable to pay off the full balance of the card—which triggers the notoriously high interest rates that come with credit cards. Your credit card’s annual interest rate could be upward of 20 percent or more, which can quickly add up—and make it more difficult to pay off the next month’s balance.

As you spend on your credit cards, make sure you’re always able to pay off the full balance every month. If you can do this, you’ll avoid earning penalizing interest and keep more money in your bank account.

3. Make your payment on or before the due date.

Late fees on their own are a costly penalty for any credit card holder. But late payments can also trigger interest charges to the balance you’ve carried over, packing a painful one-two punch.

Make sure you schedule credit card payments for the due date, if not a day or two earlier to make sure it posts in time to save you from these unnecessary fees.

4. Dispute unfamiliar charges to your account.

Most credit cards come with various forms of fraud protection in case unauthorized charges are made to your account. Review your purchases periodically and report any charge that is unfamiliar to you. 

The quicker you react, the better your credit card company can protect you.

5. Consider balance transfers or other financial tools to address large account balances.

If your credit card balances do get out of hand—whether because of uncontrolled spending, unforeseen expenses, or other factors—ignoring these balances isn’t the right answer. Instead, seek out options for short-term relief.

One option is to transfer part or all of a card's balance to another credit card to take advantage of a low promotional interest rate. You might also consider using a home equity line of credit (HELOC) to reduce the monthly interest generated on this debt as you work to pay it off.

6. Seek coaching from a credit counselor or other financial expert.

If your efforts at responsible credit card management aren’t enough to steer clear of trouble, seek out an expert who can help. 

Credit counselors or other experts at your local branch can help review your financial situation and recommend products and actions that can get you back on the path to financial wellness.

Use credit cards to build greater financial success. 

When used responsibly, credit cards can help you improve your money management, build a stronger credit score, and gain more trust from the financial institutions issuing those lines of credit.

Looking for more tips to pay off your credit card balances? Download a free copy of our e-book, The Definitive Guide to Paying off Credit Card Debt.

Download The Definitive Guide to Paying off Credit Card Debt

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