How You Should Use Your Credit Card… And How You Should Not


Girl paying for an online order, using a credit card out doors.

There are tons of myths and suggestions about using credit cards in the market today, which makes it hard for consumers to really know how to use a credit card properly. Credit cards are not the devil, and when managed properly, they can become a very powerful financial tool for yourself. However, if used improperly, you can cause yourself trouble that will take years to erase, if ever.

You Should Pay Your Bill in Full Each Month

Unless you have a card with a zero percent interest rate, you need to pay that balance off each month to avoid paying an astronomical amount of money for a cup of coffee. Charge only what you can pay off each month and use the card as a tool to manage your money, not to spend more than you have.

You Should Not Pay the Minimum Amount

We don’t live in a perfect world, so it is a bit much to ask everyone to pay off their bill every single month. Emergencies happen and you need money fast, like to fix a car or a water heater, and you need to charge it. However, when that bill comes, if you can’t pay off the bill, pay as much as you can. The more that you pay over the minimum, the faster your principal amount decreases.

You Should Buy that Lawn Mower

Small purchases that you are going to pay off in a month or two are fine to put on credit cards, especially if you get rewards or have a very low interest rate. These mid-range purchases can be hard to budget for weekly, but over a few months, they are a breeze, and using your credit card helps you make these necessary purchases.

You Should Not Purchase that Car

Unless you have an eternal zero interest rate on your card, you should never purchase a large luxury item, like a car or boat, with your credit card. Even if you pay the minimum payments, you will end up paying much more for your car than you would versus taking out an auto loan from the dealer. Always save your card for emergencies and not large purchases that will take years to pay off.

You Should Make Small Purchases

This is true if you are using your card as a way to go cashless, meaning that you manage your money through a low interest credit card. Putting all of your expenses on a credit card will allow you to manage your money easier, plus it makes tax time easy on your accountant.

You Should Not Get Cash at an ATM

Never in a million years use your credit card to get cash out of an ATM. That is just asking for long term financial trouble. Even if you have a low interest rate card, the interest rate that they will charge on a cash advance is usually much higher, like 25 percent or more. Also, you never want to use those checks that credit card companies send since it is the same thing as taking out a cash advance.

You Should Have Multiple Cards

You should have a good assortment of credit cards available at your disposal. However, that does not mean that you should be using them all at the same time. It is best to limit your portfolio to three to five cards so that the temptation is not there to go on a spending spree, but ultimately, it is up to you to know how many you can juggle.

You Should Never Co-Sign for a Friend

Co-signing a credit card or a loan for a friend is a great thing to do if you want to lose that friend. People who need a co-signer do not have good credit, or they would be able to get the loan or card themselves. Don’t ruin your friendship over money because they claim that they need help reestablishing themselves or whatnot. Save yourself the hassle and give them a gift of some money if they need it that badly. If not, it will end your friendship and possibly your credit score.

What you should and should not do with a credit card should be common sense for most people, but it can be hard when you are faced with tough decisions. It is hard to remember that life isn’t always black and white, so sticking to these guidelines is not always easy. In the end, you want to manage your money so that you do not destroy your financial goals, which means being smart with how you use your credit. Be smart and think before you swipe your credit card, and at least have a plan in place to pay it off if you need to use it.

One thought on “How You Should Use Your Credit Card… And How You Should Not

  1. david shoup

    Really liked this article, I made the mistake of withdrawing money from a cash point didn’t realise they charge extra for it!


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