Credit cards can be a wonderful thing, but they can also be dangerous if used carelessly. Those little plastic cards make it much easier to spend more than we would have if we were paying in cash. While credit cards are a convenient way to make purchases, that convenience can come at the cost of low credit scores and other financial distress if bills are not paid on time. With that being said, credit cards can be a valuable financial tool when used responsibly. Credit card best practices is what we will discuss today.
Credit cards, when used wisely, can be incredibly beneficial. They can help build your credit score, offer fantastic rewards, and provide a safety net for unexpected expenses. However, misuse can lead to debt and financial stress. Our goal is to equip you with the know-how to make your credit card work for you, not the other way around. Let’s get started!
10 Tips for Smart Credit Card Use
1 Carry the Credit Card that’s Right for You
It all begins with the type of credit card or cards you choose to use. As you know, one size does not fit all in clothing, and the same applies to credit cards. Just think about it, how many credit card offers have you already gotten this week alone? There’s a card for literally everything. Lost in that sea of bids, there might be one that you could actually use. If an offer really tempts you or you need another credit card, be sure to study the deal. It needs to make financial sense for your individual needs. Is it a crazy-low promo interest rate or 0% balance transfer? That’s fine, but if you plan on paying your card balance off in full each month, then it’s not much of a deal, now is it? Perhaps it’s a substantial number of reward points or airline miles that they’re offering. Maybe it’s no annual fee or even cash back. Whatever the deal, it needs to be right for you and how you plan on using your specific card.
Before making your first purchase, take the time to understand the terms and conditions of your credit card. What’s the interest rate? Are there annual fees? What’s the grace period? Knowing these details upfront will save you from unpleasant surprises down the road. For instance, some reward credit cards might offer amazing perks but come with a higher annual fee. Is that trade-off worth it for your spending habits? Only you can decide. Learn more about Choice One’s VISA balance transfer credit cards.
2 Keep Track of Your Spending – Every Penny Counts!
This might sound obvious, but it’s a game-changer. It’s easy to swipe and forget, but unchecked spending is a quick path to debt. Have you ever gone crazy with your credit card all month and then been blindsided by a bill that will take you all year to pay off? Sadly, this happens quite frequently, especially when you’re living large on vacation or spending your way through the holidays. Yeah, we’ve all been there. Knowing your limits for certain things, such as vacations or holiday shopping, and sticking within those limits will help you lessen the financial burden. Keeping track of your spending is as easy as regularly checking your credit card account balance online, your online statements, or via the Choice One mobile app.
Imagine you bought a new coffee machine, some groceries, and signed up for a streaming service. Individually, they seem small, but collectively, they can add up quickly. Being aware of where your money is going is the first step toward responsible credit card use. While budgeting may not be your best friend, it can help prevent you from overspending. A reputable budgeting app can also be helpful.
3 Pay Off Your Entire Credit Card Balance Each Month
Try to make it a rule, for the benefit of your budget and financial well-being, not to charge more than you can pay off by the due date. If there’s one tip you take away from this blog, let it be this one. Paying your statement balance in full every month means you avoid interest charges altogether. It’s like borrowing money for free. Let’s say your statement balance is $500. If you pay just the minimum, you’ll slowly chip away at the principal while interest accrues, making that $500 purchase significantly more expensive. Prioritizing paying off your balance is the cornerstone of credit card best practices.
Nothing ruins your credit history faster than a missed payment. Don’t use that credit card for things you know you can’t afford. Make paying your bill a top priority every month. Depending on your budget, it may be smart to go online and pay your card down with a few smaller payments throughout the month. If you receive a weekly paycheck, consider prioritizing paying down your credit card balance with each payment to help you better budget and prevent debt accumulation. If you know you won’t be able to pay for something at the end of the month, don’t charge it to your account. We understand that emergencies happen. If you do have to charge a costly auto or home repair, focus on paying down the balance as quickly as possible without adding more charges.
4 Consider Paying Off Your High-Interest Credit Cards with a Low-Interest Balance Transfer Card
If you don’t know what it’s like to have a zero balance on your credit card, as we suggested in number 3, then it’s time to find out. If you’re carrying high-interest debt on an existing credit card, a balance transfer credit card could be a lifeline. Carrying balances often results in significant monthly interest charges. If your balances are too high, consider paying down your credit card debt. If your balance is high and the interest rate you’re paying is also high, it may be time to transfer that balance to a card with a lower rate. Balance transfer promotions, such as Choice One’s VISA balance transfer card can help tremendously. Most balance transfer promotions are limited in the time you have to pay off the balance before it converts to the regular rate, so it’s essential to know this in advance and pay down your card quickly. But, like most tips on this list, if you use them wisely, you can make it work to your benefit.
5 Beware of Credit Card Fraud
Do you know one of the most common forms of fraud in the USA? Credit card fraud. Credit cards are convenient, and criminals are aware of this. They also know most cardholders don’t check their statements regularly. The Federal Trade Commission reported the agency received 478,305 fraud reports related to credit cards in 2024. It’s imperative to protect yourself. Be sure to check with your card service provider to set up mobile alerts that notify you about any transactions on your card. As mentioned above in number 2, monitor your account online (or via mobile app) to watch for any unknown charges that may appear.
Check your credit report regularly to identify any unknown accounts and report them as soon as you become aware of them. Remember, you are eligible for one free and complete credit report each year from each of the three major credit bureaus (Experian, TransUnion, and Equifax). An app like Credit Karma will allow you to check your credit scores and accounts for free, whenever you wish. However, remember that it is not a comprehensive report, merely a snapshot. Finally, be cautious at the gas pump and with other card readers, including ATMs. Criminals tend to install skimmers where they can’t be easily detected. You need to have consistent vigilance. It’s not all doom and gloom, though, as credit cards are much safer to use than debit cards when it comes to fraud protection. Unfortunately, credit card fraud is a reality, but you can take steps to protect yourself. Use your credit card, just be smart. If you see a charge you don’t recognize, report it to your credit card company immediately. Be cautious about where you use your card online and avoid sharing your card details over unsecured networks. A good practice is to shred old credit card statements and receipts that contain your card number. Stay vigilant.
6 If You Don’t Have a Rewards Credit Card, Now’s the Time to Get One
This is a great way to earn added perks when you pay off your balance each month. You can earn travel points, air miles, cash back, and more. However, this isn’t the best option if you consistently carry a balance. It doesn’t make sense to charge up your card to get points, especially if you’re paying high interest rates. It does make sense when you are paying off your card each month and want to enjoy a nice bonus for your purchases. Read our blog, “Reward Yourself with Credit Card Points” to learn more about Choice One’s UChoose Credit Card rewards.
7 Be Mindful of What Should and Should Not Be Charged
Oftentimes, consumers are unaware of other options for making purchases or paying bills, and they automatically resort to using their credit cards. While credit cards are a wise choice for certain purchases, they may not be the best option for others. For instance, if you need a kitchen remodel, a home equity loan https://choiceone.org/loans/home-equity-loans/ may be a lower-interest solution than a high-interest credit card. Even if the points sound good for a large purchase like this, you’re likely losing out when you calculate your interest cost. This also applies to college tuition costs. Student loans are traditionally a much better option. If you’re confused about this, your credit union representative or financial advisor can help explain the differences and benefits of each.
On the other hand, credit cards are ideal for online purchases and for use when traveling. From booking your vacation to paying for items while you’re jet-setting, credit cards are pretty handy and often come with bonuses, such as travel insurance, zero foreign transaction fees, or return protection. Additionally, if the card is lost or stolen, you can immediately freeze the account. Check with your credit card company to see what types of value-added services and savings you may have, and then take advantage of them.
8 Be Aware of How Your Credit Card Can Help (or Hinder) Your Credit Score
You should always be mindful of your credit score when using credit cards. Unlike most things in life, the older the better when it comes to credit. The age of your accounts has a significant impact on your credit score. Don’t be so quick to close old accounts that have been keeping your age high. Secondly, if you need to reduce your accounts, focus on those with an annual fee or those where the temptation to overspend is high. If you have a good history of paying your credit card bills on time, you can request an increase in your credit limit. This increased limit will help improve your credit utilization score by reducing your credit-to-debt ratio.
Credit utilization is a key reason to keep your credit card balances low. Just because you can spend up to your credit limit doesn’t mean you should. Keeping your credit utilization ratio (the amount of credit you’re using compared to your total available credit) low is crucial for maintaining a good credit score. A good rule of thumb is to aim for a ratio of less than 30%. For example, if you have a $1,000 credit limit, aim to keep your balance below $300. High utilization can signal to lenders that you’re a high-risk borrower.
Finally, don’t apply for too many credit cards at once. While it might seem appealing to collect all the best reward credit card offers, applying for multiple credit cards in a short period can negatively impact your credit score. Each application typically results in a “hard inquiry” on your credit report, which can temporarily lower your score. Be selective and only apply for a credit card when you genuinely need it and have a plan for its use.
9 Set Up Payment Reminders
While this ties into number 8, it’s important enough to warrant its own number. Life gets busy, and sometimes a payment due date can slip your mind. Missing a payment can result in late fees and a negative impact on your credit score – neither of which you want. Set up automatic payments or calendar reminders on your phone to ensure you never miss a deadline. This simple habit can save you many headaches and protect your financial standing. Your payment history accounts for a significant 35% of your credit score. Learn more in our blog, “4 Main Factors Impacting Your Credit Score.”
10 Live Below Your Means When it Comes to Using Your Credit Cards
Just because you’re charging it, doesn’t mean you need to buy the most expensive smartphone or extravagant pair of shoes. It’s important to remember that your credit card is not an extension of your budget. Even when you are earning a good living and have some flexibility in spending, savings should still be a priority. Rather than living large, prioritize saving. It’s not as attractive an option, but it’s a smart one. You would be surprised how quickly you can get into credit card debt when you let your guard down and overspend.
Your Financial Journey Starts Here!
We hope these best practices in credit card use help you to use your card more responsibly and better understand how your credit card can (and will) affect your credit score now and in the future.
When applying for a credit card, don’t overlook your local credit union. Credit union credit cards often come with lower interest rates and fewer fees compared to those offered by traditional banks. Plus, at Choice One, we’re member-focused, meaning our priority is always your financial well-being, not just profits. It’s a win-win.
At Choice One Community Credit Union, the financial well-being of our members is our top priority. Whether it’s our tip-filled blogs helping to ensure you remain debt-free and fiscally healthy or our renowned service, navigating you through the financial waters throughout your lifetime, we are here for you! Tap to learn the benefits of our Choice One balance transfer VISA credit cards and discover how we can support your journey to financial success.
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Learn how to live more comfortably in our blog, “Spend Less, Live More: Cost-Cutting Hacks That Keep Life Comfortable.”