How to use a credit card responsibly: 10 tips

There’s a lot to like about credit cards. You might use them instead of having to carry cash. You might get rewarded for making purchases. And with good habits and responsible use, you might use one to build credit.

Explore 10 habits that can help you manage your credit cards and keep your finances in shape.

Key takeaways

  • Learning how to use a credit card responsibly can help you better manage your finances and may have a positive effect on your credit scores.
  • Familiarizing yourself with your credit card terms and conditions can help you understand how to keep your account in good standing.
  • Making consistent, on-time payments and keeping your credit utilization low can help you build and maintain a positive credit history.
  • By paying off your statement each month, you may be able to avoid paying interest charges.

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What are credit cards and how do they work?

Before getting into how to use a credit card, it might help to know how credit cards work. 

A credit card is a type of revolving credit or open-ended account that remains open as long as you continue to make payments. 

When a credit card issuer approves you for a credit card, they’re lending you a line of credit up to a certain credit limit. As you use the credit card, your credit card balance increases and your available balance decreases. As you make payments, your available credit is restored. 

So how does interest work? Generally, after a grace period, the balance you owe starts to accrue interest. Paying off your balance every month is one way to avoid interest on new purchases.

10 tips for responsible credit card usage

With healthy spending habits and responsible use, a credit card can be a helpful tool in building credit. And good credit scores can help you achieve your long-term personal finance goals. So once you’ve picked the best credit card for you, keep these tips in mind: 

1. Read your card agreement and know your terms

When you open a new credit card account, be sure to carefully read through the terms of your card, including the customer agreement and the account opening disclosures. This way, you’ll know what to expect when it comes to fees, interest rates, billing cycles and more.

2. Be aware of potential fees

Speaking of fees, familiarizing yourself with common credit card fees can be a helpful part of understanding how to use your card responsibly. For example, you may be charged late fees if you miss monthly payments or a transaction fee for completing a cash advance. And it’s worth keeping in mind that some cards come with an annual fee

If you think you’re paying too much in fees or are interested in unlocking more benefits, you might consider what other credit card issuers have to offer. When you’re comparing credit cards, fees and annual percentage rates (APR) are a good place to start.

3. Make payments on time

As the Consumer Financial Protection Bureau (CFPB) explains, you should make your payments on time, every time. That’s because your payment history is an important factor when it comes to your credit scores

In fact, late payments can stay on your credit report for up to seven years. Late credit card payments can also lead to late fees and higher interest rates.

You could consider setting up automatic payments or electronic reminders to help you avoid missing payments.

4. Pay more than the minimum

Making your minimum payments by the due date every billing cycle helps you avoid penalties and fees. And paying the minimum keeps your account in good standing. But if you pay only the minimum, you’ll carry a balance. And you’ll be charged interest on that balance. 

Those interest charges can make it harder to pay off your credit card debt. So take it from the CFPB: “If possible, pay off your credit card bill in full each month.”

If you can’t pay your credit card bills, there are steps you can take that might help.

5. Stay below your credit limit

Using only the credit you need can help you stay below your credit limit. That’s important because your credit scores can be affected by your credit utilization ratio, a measure of how much of your available credit you’re using. The lower your credit utilization ratio, the better your credit score might be. 

In fact, the CFPB recommends using no more than 30% of your credit limit. So if you think you might need extra help limiting your spending, consider making a budget.

6. Check your monthly statements carefully for accuracy

Regularly checking your credit card statements is a great way to keep your spending top of mind. It can also help you spot transactions you don’t recognize. And that could help protect you from fraud.

You can set up instant purchase notifications in the Capital One Mobile app to receive an alert when a transaction is completed on your credit card that is greater than the amount you defined. Capital One can also help protect your account by monitoring your transactions and reaching out when it spots something that seems out of the ordinary.

7. Report a lost or stolen card immediately

Report your card lost or stolen if you’re missing your card or think someone stole your account number. When you do, your lender will likely deactivate your old card and account number so no one else can use it. 

You can also tell the issuer if you believe you’re a victim of credit card fraud and there are purchases on your account that you didn’t make. The sooner you notice and report credit card fraud, the quicker you can stop unauthorized spending in your name.

Many card issuers offer security features like credit card fraud detection to ensure you won’t be responsible for charges you didn’t authorize. If you lose your card or suspect that it’s been stolen, you may be able to lock your card to prevent it from being used. At Capital One, you can instantly lock your credit card with just a few taps on the Capital One Mobile app. And if you find your card, you can unlock it just as easily.

8. Simplify payments

If you’re juggling multiple credit card payments, there may be a way to consolidate your debt into a single payment—sometimes with lower interest. One way to do that is through a balance transfer, which lets you roll the balance you owe on one or more cards to a new card. 

Completing a balance transfer may help you lower your monthly interest payments and could make it easier to keep track of your total spending. But one thing to keep in mind: You can’t usually transfer balances between cards from the same issuer. And you should check to see if there are any fees associated with balance transfers.

9. Check your credit limits

Using credit responsibly by doing things like making payments on time each month should keep your account in good standing. And sometimes, practicing good habits might lead your issuer to offer a higher credit limit on your card. 

Though you’re not required to accept an offer to increase your credit limit, it’s something you may want to consider. That’s because credit line increases raise your total available credit, which may help you keep your credit utilization lower. And that lower utilization ratio may be a good thing for your credit scores.

10. Take advantage of your credit card rewards

If you have a rewards credit card, like a cash back card or travel credit card, consider ways to get the most out of it. 

That could mean finding one that matches your spending habits so you can maximize the benefits of your card. If your card has an annual fee, fully understanding the card’s perks and benefits can ensure the fee is worth it.

Best way to use credit cards in a nutshell

Whether you’re establishing or rebuilding credit, a credit card can be a valuable tool when used responsibly. Creating good habits like making on-time payments, using only the credit you need and monitoring your credit can ensure that your credit card use is helping, not hurting.

To get an idea of where your credit stands, join the millions using CreditWise from Capital One. It’s free, whether or not you’re a Capital One cardholder. And using it won’t hurt your credit scores.

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