5 Tips on How to Use Credit Cards Responsibly

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Whether you’re new to the world of credit cards or you’ve used credit cards for many years, it’s important to handle the pieces of plastic or metal that you keep in your wallet in a responsible manner. A credit card can be more than a convenient payment method. When you manage your credit card wisely, it can help you establish good credit history, earn valuable rewards, and enjoy many other benefits.

Below are five expert tips on how to build responsible credit card management habits. These tips will show you the best ways to maximize your credit card’s benefits while keeping your credit card debt to a minimum.

1. Never Pay Late

The most important rule to follow with credit cards is to always pay your bill on time. Payment history (aka, whether you pay your bills on time) has a bigger impact on your credit score than any other information on your credit report. Your payment history influences 35% of your FICO® Score, and it’s worth around 40% of your VantageScore® credit score too.

Not only do late payments have the potential to damage your credit score, but when you pay your credit card late, there could be other negative consequences, too. For example, your credit card issuer might charge you a late fee. And if you fall far enough behind on your credit card bill, your card issuer might take other actions like reducing your credit limit, raising your APR to the default rate, or even closing and charging off your account.

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2. Pay Your Full Statement Balance

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Another best practice that’s important to follow when it comes to credit card management is always paying your full statement balance. There are two reasons you want to make a habit of paying off your credit card bill each month: Doing so can protect your credit score, and it can save you money.

Protect Your Credit Score

The relationship between your credit card balance and your credit limit — called credit utilization— plays a significant role in the calculation of your credit score. Your credit utilization rate accounts for 30% of your FICO Score. When you pay off your credit card each month (especially if you pay before the due date or make multiple credit card payments), it can help keep your credit utilization rate low and protect your credit score from potential damage.

Save Money

When you borrow money, you must typically pay the lender interest and sometimes fees as part of your borrowing arrangement. But credit cards come with a grace period. Therefore, if you repay the full amount you borrow each month (aka, your statement balance) by the due date, you can use your credit card without paying interest to your credit card company. Carrying an outstanding balance from month to month, however, will lead to interest charges on credit cards and cost you a lot of money.

3. Track Your Spending

As you use your credit card throughout the month, it’s important to track your spending on the account. Keeping tabs on the amount you spend on your credit card can help you accomplish several goals, including the following.

• Remain (well) below your credit card limit. 
• Stick to your monthly budget.  
• Avoid credit card debt.

There are many ways to track your spending to make sure you don’t use your credit card for more charges than you can afford to pay off in a given month. You could simply make a habit of checking your credit card’s mobile app each day or several times a week. But if you’re trying to manage multiple accounts at once, the process can become complicated.

On a positive note, there are many personal finance apps available that can make tracking your spending and budgeting easier to navigate. And there are even apps that can help you track your credit card rewards to make sure you’re maximizing those benefits, too.

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4. Review Your Statement Each Month

Another smart habit to develop when you open a credit card is reviewing your statement for accuracy. You can either check your statement online after your card issuer releases it each month or go over the statement that shows up in your mailbox. And it’s not a bad idea to periodically go over the charges throughout the month either to keep your eye out on any fraudulent charges that may pop up.

One of the biggest perks of using a credit card is that the payment method offers robust fraud protections. (Thanks to the Fair Credit Billing Act, your liability for fraudulent credit card transactions is capped at $50 if you file a dispute within 60 days.) However, you have to take action to report credit card fraud if and when it happens to you.

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5. Have a Smart Rewards Strategy

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Some of the best credit cards come with generous sign-up bonuses and valuable offers that allow you to earn points, miles, or cash back on your everyday purchases. And when you combine those rewards credit cards with a smart rewards-earning strategy, you could get even more bang for your buck.

For starters, it’s wise to research the types of credit cards you’re likely to qualify for based on your credit score. If you have fair credit, for example, you might want to work to improve your credit before you try to apply for credit cards that require an excellent credit score to qualify.

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It’s also critical to avoid spending more than you can afford to earn a credit card bonus or extra points and miles. Earning credit card rewards or free travel can be amazing. But no credit card rewards are worth the cost of expensive interest charges or the potential credit score damage that high levels of credit card debt could cost you.