How to Use a Credit Card Wisely to Build Credit and Earn Rewards

Chelsy Meyer  | 

Using a credit card wisely isn’t as simple as it sounds. It’s not always as easy as charging your card and paying your bill. It’s about knowing how much to charge and how much to pay. You’ll want to avoid any fees or interest, protect yourself from fraud, and read the fine print. By learning how to use your card wisely, you’ll be better setup to have your good credit card habits translate to a better credit score and obtaining credit card rewards. Through understanding the ins and outs of your credit card and how to use it responsibly, you’ll be getting the most out of your card while gaining the benefits.

How to Use a Credit Card Wisely and Earn Rewards

Each card carries with it it’s own stipulations on earning rewards. However, it’s a pretty basic stipulation that with more use comes more rewards. The more important thing is to not get distracted by the rewards, and get into debt by overspending with your credit card. It doesn’t take long for interest and fees to cost you more than you are earning in points. Here are a few simple tips to keep in mind to ensure you are using your credit card responsibly.

Never Carry a Balance

There are a lot of perks involved when you never carry a credit card balance. One of them is the ability to avoid accruing interest. If you only spend what you can easily pay back each billing cycle, you’re sure to spend responsibly and still gain rewards through routine payment. Not only will this help you to avoid credit card debt and the hassle it can be to pay off credit card debt quickly, but you’ll also have better luck staying within your grace period and avoiding late fees.

Pay the Bill On Time, In Full

Paying your credit card bill on time (and in full) is one way to build your credit with your credit card. Payment history is a key component in your credit score, so this practice is very important. Help yourself to remember by setting up automatic payments.

Avoid Unnecessary Fees

Knowing when to pay your credit card bill isn’t just about paying on time, it’s also about paying before your interest is applied. Note that those two things don’t always coincide. Paying twice a month is one way to avoid this, or checking on the date that your interest is applied. It’s also important not to pay late so that you can avoid late fees as well. You want to use a credit card to help you gain rewards and credit, not to make things harder with fees and interest. Look into the nitty gritty parts of your credit card agreement to find information on balance transfer fees, annual fees, cash advance fees, and foreign transaction fees. The more you know about these fees the more you’ll understand about avoiding them.

Track Your Purchases and Monitor Your Statement

Using your credit card wisely isn’t just about spending wisely and paying your bills in a responsible manner. It’s also about tracking your purchases and monitoring your credit card use. In doing that, it should be easier to spot fraudulent charges that can negatively impact your credit and reward opportunities. Sign up for fraud alerts, and look into setting up purchase alerts for amounts above what you normally would charge in one transaction. Usually, setting an alert for a purchase over $100 is a good idea.

Take Advantage of Credit Card Rewards

There are a ton of different credit card reward opportunities. Points, cash back, hotel rewards, airline miles, retail rewards, or gas points are all types of rewards a card may offer you. When you’re deciding on a type of card, the reward opportunities can be a major deciding factor for you. Find the reward package that makes most sense for you, look into the details of earning those rewards, and improve your credit while obtaining them.

Understand Additional Credit Card Perks and Benefits

Credit card perks and benefits can be just as helpful to your finances as the credit card rewards themselves. Things like purchase protection, fraud protection, credit monitoring, low interest, or balance transfer perks are all benefits to look into and understand how to use. A secured card option is also a perk in that it’s a great way for those with no credit or low credit to get a credit card to help build their score. Look into these perks and benefits and be sure to utilize them so you’re getting the most out of your credit card to gain rewards and improve your credit score.

How to Build Credit With a Credit Card

Credit cards can sometimes get a bad rap in their relation to credit scores. Truthfully, a credit card is a great way to build credit. However, the key is to use the card wisely and not let spending get out of hand or payment fall by the wayside.

Don’t Cancel Credit Card Accounts

Believe it or not, you shouldn’t be canceling your credit card accounts. Unless you think having it open will lead to more frivolous spending and the positives outweigh the negatives in that sense, it’s best to keep your accounts open. The age of your credit card accounts is a factor in your credit score. For that reason, leaving old accounts open is helpful even if you’re not using it. However, it’s good practice to be sure there’s no monthly or annual fee being charged if you’re not going to use that card but keep the account open.

Ask to Get Your Credit Limit Raised

Your credit utilization ratio is a factor in how your credit score is calculated. By getting your limit raised on your credit card, your utilization ratio is even smaller by comparison. If you’ve spent a lot of time creating a reputation for timely payments and responsible card use, your credit card company shouldn’t have an issue raising your limit. In fact, many cards raise your limit periodically anyway.

Don’t Apply for Too Many Cards

Everything in moderation, and credit card use is no different. Once you start to discover just how many credit card rewards there are and how easy it can be to take advantage of the perks, it can be difficult to see so many offers come in the mail and to decline them. However, too many lines of credit can be tempting to utilize, difficult to manage, and difficult to pay off. Not to mention the credit score inquiries. Stay conservative with the number of credit cards you’re utilizing in order to use your credit cards wisely.

Become an Authorized User on Someone Else’s Credit Card

Becoming an authorized user on someone else’s credit card is a great way to build credit without taking a chance on responsible credit card use. It can be tempting to have a line of credit available at any time and not use it. Being an authorized user is a great option for those who want to improve their credit score but have limited credit or poor credit. You may not be in charge of utilizing the rewards, the primary user usually gets a say in the rewards, but you’ll still benefit from their responsible credit card use.

Use a Secured Credit Card

If you’re really just trying to build or repair credit, forego the rewards and perks and instead get something simple and reliable. A secured card requires a cash security deposit and you can only charge to the amount of that deposit. This makes it a great option for those with poor or limited credit, but it’s also a great option for those that are looking for the practical credit building perks of a credit card without the risks associated with late payments or overuse.

Credit cards are multifunctioning for your finances. They are not just lines of credit meant to increase your spending potential, they are also tools for credit health and extra perks. Knowing how to use a credit card wisely can greatly determine the role that a credit card will take in your life and with your finances. They can be a great help, or a huge disservice. Ensure that they work for you and not against you by practicing the responsible habits that will make your credit card a tool to increase your credit score.


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Chelsy is a writer from Montana who now lives in Boise, Idaho. She graduated with her journalism degree from the University of Montana in 2012. She enjoys talk radio, cold coffee, and playing Frisbee with her dog, Titan. Follow Chelsy on Twitter @Chelsy5

This post was updated April 25, 2018. It was originally published April 25, 2018.