How to use a credit card: A guide to doing it right


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Credit cards are a fairly standard part of adult life — but very few of us are taught how to use them. Some people mistakenly view credit cards as a source of “free money,” running up balances that can take months to years to pay off. Other people apply for credit cards without considering how factors like interest rates or annual fees could affect them financially. There are also plenty of people who apply for credit cards because they want to earn rewards — and then never bother to claim their introductory bonus, activate their rotating category rewards or redeem their rewards at their maximum value.

Don’t be like those people.

Before you open your next credit card, use this guide to learn how to choose a credit card, how to manage your credit card spending, how to earn credit card rewards and how to avoid going into credit card debt.

Understand why you’re getting the card

Before you start researching credit cards and filling out applications, it’s important to understand why you’re getting a credit card. A person who wants to build their credit score by opening their starter credit card has different needs than a person who’s used credit for a while but wants to open their first travel credit card, for example.

There are a lot of reasons to open a credit card, including:

  • To build your credit
  • To improve a bad credit score
  • To earn rewards on everyday spending
  • To earn high-level rewards on a specific category of spending (such as travel)
  • To transfer an existing credit card balance and pay it off without paying interest
  • To fund a large purchase and pay it off over time
  • To manage expenses during a period of variable income

However, a person who wants to earn high-level rewards on travel or dining out will need a different credit card than a person who wants to fund a single large purchase. In the first case, you’ll want one of the best rewards credit cards; in the second case, you’ll want one of the best 0% introductory APR cards — that way, you’ll have a period of time during which you can pay off your big purchase interest-free.

Knowing what you hope to get out of your credit card will help you choose the best credit card to meet those needs — which brings us to the next step in the process.

Choose the right credit card for you

Even if you know exactly how you hope to use your new credit card, you’re still going to have to choose between several available options. Luckily, Bankrate has done a lot of the research for you. We’ve got lists of everything from the best cash back credit card to the best credit cards for college students, so use our rankings to help you decide which credit card might be right for you.

You’ll also need to be aware of certain factors that might affect your ability to get approved for a credit card, such as your credit score. If you have an excellent credit score, you’ll be eligible for a wide variety of credit cards, including some of the highest rewards credit cards on the market. If you have a good credit score, you’ll also have plenty of credit card options to choose from. If your credit score is average or poor, credit card issuers may charge you higher interest rates or deny your application altogether. And if you’re among the 21% of Americans with a credit score below 600, you might need a secured credit card to boost your bad credit and help you become eligible for better credit cards in the future.

Ideally, your new credit card should:

  • Help you achieve a specific goal: fund travel, pay off debt, build credit, etc.
  • Offer a benefit that you aren’t currently receiving from another credit card: if you’ve already got a card that offers high-level rewards on groceries, for example, pick a card that rewards a different type of spending.
  • Match your current credit score and spending habits: if you don’t put a lot of purchases on your credit card, for example, avoid cards with high annual fees — you won’t earn enough in rewards to cover the cost of the fee, and you’ll lose money.
  • Minimize or eliminate fees. Read your credit card’s fine print. Do they charge late fees or penalty APRs for missed payments? Are there other hidden fees that could add to your balance? If there are too many fees and penalties, look for a better option.

Still unclear about which card to apply for? We’ve got seven questions to help you decide.

Who shouldn’t get a credit card?

It’s not always a good idea to open a new credit card — especially if you already have more credit card debt than you can pay off. A lot of people successfully use balance transfer credit cards to pay off existing credit card debt, especially when the balance transfer cards offer 0% interest grace periods. However, some people open balance transfer cards with good intentions and either fail to pay off their debt before the grace period runs out or use the card to rack up even more debt.

It’s also a bad idea to apply for credit cards that aren’t designed for people with your credit score. Every time you apply for a credit card, your credit score drops slightly for a short period of time. People who apply for numerous credit cards because they keep getting rejected could take a bigger hit to their credit — and if you already have average or poor credit, that’s a hit you can’t afford. Plus, creditors can see that you’ve applied for a lot of credit recently, and that will make you a less attractive customer.

Some people like to practice what’s called “credit card churning;” opening new cards, claiming the introductory bonuses, and closing the cards. Some credit card issuers are cracking down on churning by instituting new rules that state you can’t open a new card if you’ve already opened a certain number of cards in the past year— meaning you might have to wait a while before opening your next high-rewards credit card and claiming your bonus.

Lastly, be wary of those retail credit cards that stores offer during the checkout process. Yes, you might be able to save 15% on your current purchase, but many of those cards have high interest rates — and if you don’t pay off your balance in full every time, you could end up paying a lot more in interest than you saved on that 15% discount. Here are a few more reasons why retail credit cards aren’t necessarily your best option.

Use your credit card responsibly

Once you have your new credit card, it’s time to start using it — but be careful. Making too many late payments or maxing out your card could lower your credit score, saddle you with interest and fees, and make it more difficult for you to pay off your debt or get additional credit in the future.

You’ll often hear the phrase “use credit responsibly,” and here’s what that means: 

  • Make at least the minimum payment, on time, every payment cycle. This responsibility will protect your credit score and prevent you from having to pay late fees. Some credit cards even raise your interest rate if you miss a payment, so get in the habit of paying on time.
  • Pay your balance in full as often as possible. Many people pay their total credit card balance every month. Other people carry a balance but pay it off regularly — maybe every few months. This method is the best way to keep yourself out of credit card debt, and it also lowers the amount you have to pay in interest.
  • Avoid maxing out your credit cards. Maxing out your credit cards is bad for your credit score and bad for you — you’re going to have to pay all that debt off someday, and if you don’t have enough income to pay the balance off quickly, you’ll start seeing a lot of interest added to your debt. Some credit cards charge fees if you go over your credit limit, making your debt even harder to pay off.

You should also be paying attention to how much total debt you’re putting on your credit cards. According to Experian’s 2017 State of Credit Report, the average American has a credit card balance of $6,354. For some people, that’s no problem; they’re earning enough every month to pay off that balance regularly. For other people, well… that’s a lot of debt.

If you want to keep from going into that type of credit card debt, our best advice is to avoid overspending. Know how much you’re putting on your credit card every month, and don’t spend more than you can pay off. Use apps and budgeting tools to track your income and your expenses, so you know whether your credit card spending is on target. Wells Fargo credit cards, for example, give you access to Wells Fargo’s My Money Map, an online tool that helps you create a budget, track your spending, and save for your goals. If you want to be a responsible credit card consumer, avoiding the overspending trap is the best thing you can do.

If you get in over your head

If you find yourself with more credit card debt than you can handle, don’t panic. There are ways to bring your debt down, avoid paying high interest rates and keep your credit score from plummeting.

First, contact your credit card issuers and ask to speak to the hardship department. You might be able to negotiate lower minimum payments, reduce or eliminate late fees, and even reduce your interest rate.

Next, make a plan to pay off your debt. This might involve making a budget, or using debt repayment strategies such as the Snowball Method or the Avalanche Method. You might need to look for ways to reduce your spending or increase your income so you can put more money toward your debt.

Lastly, consider credit counseling services. These are different from debt forgiveness services, which aren’t always as forgiving as they look. The U.S. Department of Justice has a list of approved credit counseling services that you can use to help manage and pay down your debt — plus, these services may have additional resources to help you reduce your debt payments and interest rates.

Learn how to maximize your rewards

If you’ve got a credit card that offers rewards, take advantage of them! Whether you’re earning cash back, points or miles, it’s worth learning how to maximize your rewards and earn as much as possible.

Here are some common strategies:

  • Make sure you earn your introductory bonus. Many credit cards offer a big bonus to new cardmembers, such as “earn 30,000 points if you make $3,000 in purchases in the first three months.” If your card offers an introductory bonus, don’t leave it on the table! Make the purchases, claim your bonus and pay off your balance. The only reason not to claim an introductory bonus is if it would cause you to go into debt — and if the introductory bonus is too high for your current level of spending, it’s a good sign that this might not be the right credit card for you.
  • If your credit card offers high-level rewards for a certain category of spending, use that credit card every time you spend in that category. If you have a credit card that rewards dining out, use that card every time you dine out. If you’ve got another card that rewards travel, use it every time you book a flight.
  • If your credit card offers rotating category rewards, know which categories are coming up. Some credit cards, such as the Discover it® Cash Back card and the Chase Freedom® card, offer their highest rewards on categories that rotate every quarter. Keep track of which categories currently receive rewards and which categories are coming up; that way, you can plan your spending so it earns you the most rewards. (These types of credit cards often require you to activate your rewards before you can earn them, so don’t forget!)
  • Know how to redeem your rewards for their best value. Some credit cards increase the value of your rewards if you redeem them in a certain way — travel credit cards nearly always give you the highest value for your points or miles if you redeem them for travel, for example. Don’t waste your rewards on gift cards if they’d be worth more as travel statement credits.
  • Use a flat-rate cash back credit card on all other spending. If you’re not trying to earn an introductory bonus or get a high-level reward on a specific category of spending, put your purchase on a flat-rate cash back credit card. Why? Because cards that give big rewards to certain types of purchases tend to give very small rewards for all other purchases. A flat-rate cash back card will give you more rewards for the purchases that aren’t already covered by your category-specific credit cards. Use our best cash back rewards credit card list to explore your options.

Remember: if you make too many late payments or rack up too much credit card interest, you’ll wipe out everything you’ve earned — and more. Don’t let bad habits get in the way of your rewards.

Use apps and online resources as guides

Pretty much every credit card lets you set up an online account these days, and many offer apps that let you manage your account from your mobile device. Use these tools to help you track your spending, make on-time payments and keep yourself from going into debt.

If you want additional resources to help you manage your spending, consider online budgeting apps like Mint or YNAB — or use one of Bankrate’s many helpful tools, such as our Home Budget Calculator or our Credit Card Payoff Calculator.

The more you know about how credit cards work, how responsible credit card use can affect your credit score and how to maximize your credit card rewards, the better prepared you’ll be to get the most out of your new credit card. Use this article to help you get started and continue to use Bankrate’s tools, your credit card’s resources and online budgeting apps to help you use credit effectively. Be careful to avoid overspending and make your credit card a balanced part of your healthy financial life.