Credit cards are a powerful financial tool. They offer flexible access to funds, secure payment options, and often include perks such as cashback or frequent flyer miles.
With this much easy access to cash, it’s easy to get in over your head. However, with guidance on how to use a credit card responsibly, you can make your cards work for you!
Let’s start by discussing why a credit card might be useful.
In This Article
Reasons to Use a Credit Card
Paying your balance down each month gives you all the best benefits of using a credit card without racking up interest charges or getting knee-deep in debt. Let’s take a look at how to use a credit card responsibly.

Cash Back and Other Rewards
Many credit cards offer lucrative rewards programs that reward the user for making everyday purchases. A card rewards program can take many forms; before jumping at the first ad you see, do some research and find the card that gives rewards you’ll actually use.
Some credit card rewards programs include:
- Cashback: Some cards give a flat percentage of purchases back in cash (often 1%), while others will give you cashback (or a higher percentage of cashback) on certain categories of purchases.
- Travel: Almost every airline has an associated credit card that allows you to accumulate frequent flyer miles with each purchase. Many hotels offer rewards cards as well.
- College expenses: Got a 529 college savings plan? There are several cards that you can link to an eligible 529 plan and save money for a child’s future college expenses with every purchase.
- Retirement planning: Most popular investment firms and brokerages offer affiliated credit cards that deposit a percentage of your purchases directly into your IRA or another retirement plan.
Points: For a variety of reward choices, a card that offers points is a good option. Each purchase accumulates points which you can redeem for a variety of rewards.
However, be sure to read the fine print. Some reward programs have spending caps, thresholds that must be met for eligibility, or limited-duration bonus periods. And if you accrue debt trying to get rewards, you’ll often pay more in interest than you gain. That said, choosing the right rewards card and using it for everyday purchases is a great way to make progress toward your financial goals.
Building Credit
If you have rocky credit or your credit history is short, credit cards can help you establish a stronger credit score. Just use the card for everyday purchases and then pay your card off at the end of each month. By doing so, you’ll establish a history of timely payments and credit utilization that can often have a very positive effect on your FICO credit score.
Security and Consumer Protection
When paying for services rendered, big-ticket items, or online purchases, credit cards give you some security and consumer protection advantages that not even a debit card can match.
For example, if you pay for something and the business doesn’t fulfill their side of the transaction, you can dispute the charge. The same applies to fraudulent transactions.
While this is also an option with debit cards, using a credit card means your funds aren’t tied up during the investigation. Many credit cards also carry consumer protections such as rental car insurance, travel insurance, and extended warranties when you use your card for the original transaction.
How to use a credit card responsibly
How do you use a credit card responsibly? We’ve got 6 tips to help you get the most from your credit cards.
1. Keep Your Balance Low
The best way to avoid letting your interest charges and balance get out of control is to pay your balance off every month. By paying your balance off in full each month, you get all the benefits of using a credit card without paying interest.
If you have to carry a balance because of an unexpected expense, keep it as low as possible and pay it off as soon as you can. One commonly quoted guideline is that consumers should strive to use less than 30% of their available credit in order to maintain the best possible credit score.
2. Take Advantage of Balance Transfer Offers
If you already have existing balances on credit cards, taking advantage of balance transfer offers may help pay them down. Many cards offer a low promotional interest rate to transfer balances from other cards.
It’s important to have a plan when taking advantage of a promotional offer, though. Know what the rate will be when the promotional rate ends; you don’t want to end up with a higher interest rate than you started with. Also, in many cases, failing to pay the balance off in full incurs interest charges on the full amount at the end of the promotional period, and you will accumulate interest on any new purchases made with the card.
An alternate option is using a personal loan to pay off credit card debt; this eliminates the temptation to use it for other purchases and gives you a set payment and period to pay off your card balance.
3. Make More Than the Minimum Payment…On Time
Credit card minimum payments rarely cover much more than the interest charges each month. To pay down a balance on a card, it’s advisable to pay more than the minimum.
That being said, even if all you can afford is the minimum payment, it’s critical to make that payment on time. Your payment history is one of the most important factors in determining your credit score. Also, a late payment can incur a fee and, sometimes, a higher interest rate.
4. Read the Terms of Service
It’s important to review the terms of service and cardholder agreement carefully when you open a new credit card account. Make a note of fees and interest rates. You’ll also want to review the terms of any promotional offers or rewards programs associated with the card. On some cards, for example, a single late payment can cancel any promotional interest rates on the card.
5. Keep Your Accounts Open
The amount of credit you have, the age of your accounts, and your credit utilization ratio all play important roles in determining your credit score. If you’ve paid off an account and it doesn’t have an annual fee, consider leaving it open so it continues to boost your credit score. You may even consider using them for minor, automatic payments (like Netflix, for example) in order to show a dependable payment history. Just be sure to check your account monthly to be sure nothing has been charged to them.
This strategy depends on self-discipline; you should only leave accounts open if you won’t be tempted to use them inappropriately. It can, however, be a great way to boost your credit score.
6. Check Your Statements and Keep Your Card Secure
Many card issuers feature $0 fraud liability for unauthorized transactions, so it’s important to go through your statements every month and inquire about any charges you don’t recognize. It’s also important to report a loss or theft of your card immediately to avoid liability for charges placed on the card.
Using Credit Cards Responsibly
Credit cards can be a double-edged sword; they provide amazing flexibility and some significant benefits, but if not managed responsibly, it’s easy to get in over your head. By following these credit card tips, you can reap the benefits of a credit card without the drawbacks!