- Money Matters
- Banking 101
5 Tips for Using Credit Cards Responsibly
Credit cards are not just for buying things. They can also help you build a good credit rating—if you use them responsibly. Here are 5 tips on how to use a credit card wisely and keep credit card debt to a minimum.
1. Pay the balance due each month by the due date.
Pay the balance due each month by the due date to avoid interest charges or pay at least the minimum payment due to avoid late fees. Resist the temptation to spend more than you can pay in any given month. Not "biting off more than you can chew" is the basis for how to use a credit card responsibility.
2. Avoid skipping payments.
Pay your bill every month on time. In those months in which you prefer to pay less than the full balance, pay as much over the minimum payment due as you can. If you are unable to increase your monthly payments or want to reduce your balance quickly, use your card less.
3. Use the card cautiously.
Especially at the beginning, use your credit card for necessary purchases only. What are necessary purchases? Things like your cell phone bill, internet and cable bills, books for college and other college expenses.
Excessive spending may lead to monthly payments that are more than you can afford. Consider that one day you may need your credit card for an emergency situation. Monitor your purchases wisely and buy only those items you need, not want.
According to the Consumer Finance Protection Bureau, credit card companies can change the terms of your account at any time. They are required to give you proper notice, but you should be extra vigilant in case you miss a written notice they may send or ‘fine print’ on your billing statement. Always review your statement promptly and regularly monitor your balance, credit limit, and available credit, as well.
4. Use the credit card as a budgeting tool.
As you become more comfortable using and paying off your balance each month, try using your account as a budgeting tool. By checking your account activity online or through your monthly billing statements, you can see exactly how much you've spent at the end of the month. If you're able to pay the balance due each month by the due date, you're on your way to becoming a responsible credit card user.
5. Protect yourself from credit card fraud.
Credit card fraud and theft are inherent risks of having a credit card, but the risks can be mitigated by your vigilance. Always report fraud or suspicious activity on your card immediately to the card issuer. Monitor your statements, whether online or paper. Report and replace lost or stolen cards immediately. Understand the issuer's security policy and the card's security features and how the issuer protects its customers’ personal information.
Learning how to use a credit card responsibly takes time. But once you do, you may experience some of the advantages of using a credit card, such as cash-back options, ways to earn rewards, free airline miles and fraud protection. Knowing how to use a credit card wisely can help you avoid debt and build your credit history.
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