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7 Tips to use a credit card wisely

Credit cards can be a great tool for managing your finances, but it’s important to use them wisely. There are steps you can take to make sure you get the most out of your credit card while avoiding fees and racking up debt. In this article, we’ll share seven tips that will help you use your credit card responsibly. From developing a financial plan to understanding the basics of credit cards, these strategies will help you save money and improve your credit score.

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7 Tips to use a credit card

1. Set a budget and stick to it

It’s easy to overspend when using credit cards so setting a budget and being self-disciplined about sticking to it is our number one top tip.

Overspending can easily create out-of-control balances on credit cards and before you know it you’re paying hundreds of dollars a month in interest.

There are tons of helpful budgeting apps out there that can help you create and manage your budget.

2. Don’t charge more than you can afford to pay off

To avoid paying expensive interest fees make sure you only charge what you can afford to pay off each month.  

If you are using your credit card to charge an emergency expense, like a car repair, try to make as big of payments as you can afford to keep the total interest owed to a minimum.

Read How to pay off credit card debt for more strategies to get out of debt fast.

3. Review your credit card statement regularly

Checking in weekly or at least monthly to review charges on your credit card is crucial for several reasons,

  • Helps you stick to your budget,
  • Spot any suspicious charges that don’t belong to you,
  • Keep on top of any fees or subscription renewals that you might want to cancel to save money.

4. Sign up for automatic payments

Avoid unnecessary late fees that can range from $40 and up, by making sure your payment is always on time with automatic payments.  

Not only does getting charged a late fee a bummer, but it’s also a ding to your credit score.

5. Find a credit card that matches your lifestyle

There are a ton of credit card options available, and the really good ones should reward you for using their card.  Oftentimes these types of cards may have an annual membership fee, so just make sure the savings in rewards are worth the cost of the fee.

Things to consider when deciding which card is working the best for you:

Shopping habits

If you have a favorite store that you shop at,  whether it be Costco, REI, Amazon, or Walmart – choosing a card that rewards you for buying where you shop frequently is smart.

Cards from a favorite store will either provide money for charges made on your card towards purchases at your favorite store, like the REI Co-op Mastercard, or even cash directly back to you for charges made, like Costco’s Citibank card.

Roost Tip! Even better, rewards are incremental, so you’ll earn more for purchases made at the card’s store vs. purchases from other stores.

Travel

If you like to travel, you might want to consider a credit card through an airline like Alaska or a hotel like Hilton.  

Not only will you earn travel points that tend to go further for travel-related purchases, but you earn extra points towards travel expenditures and get special discounts when using your card to buy a plane ticket through Alaska or a room at a Hilton.

Gas or electric charging rewards

If you drive your car a bunch for work, leisure, or just life stuff, using a credit card that gives great rewards on gas or electric charging purchases is the way to go. You’ll see extra points or dollars that will help you pay for all car fueling.

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6. Make mid-cycle payments to boost your credit score

Making mid-cycle payments can help you stay on top of your finances and keep within budget. 

By making regular payments throughout the month, you can reduce your balance every time you make a payment and thus reduce the amount of interest that will be charged on future purchases. 

7. Be aware of hidden fees or interest rates on your credit cards

Hidden fees and high interest rates can add up over time so be sure to understand what using your card may cost you. Following are a couple of examples:

Zero interest balance transfer specials

If you transfer a balance from a different card to save on interest, with most cards your payments will go to the lowest interest rate balance first. 

Try not to use a zero-interest balance transfer card for other purchases until the transfer balance is paid completely off.

Cash withdrawals

Many cards allow you to withdraw a percentage of your available balance as cash. The interest rate on cash balance withdrawals is more than regular purchases. And again, when you start paying it back you end up paying down lower interest balances first.

How to use a credit card: The basics

When it comes to using credit cards wisely, understanding the basics is an important first step. 

Types of credit cards

There are many different types of credit cards available, such as:

  • Student cards
  • Business cards
  • Rewards cards 

Each type offers different benefits and features that should be taken into consideration when selecting the right card for one’s spending habits and financial goals.

Fees and interest rates

In addition to the various types of cards, there are also varying fees and interest rates associated with each card, some examples include: 

  • 0 interest balance transfer 
  • Annual fee
  • Late fee
  • Cash advance fees

It is important to read through all of the terms and conditions outlined by the credit card company for any additional costs or restrictions on usage before deciding on a card. 

Rewards programs

Some popular rewards programs include:

  • Cashback offers
  • Airline miles
  • Hotel discounts
  • Gas rewards

It is also important to understand any special offers or introductory rates that may be available with a particular card. These can often provide great value for money if used correctly.

Minimum payment requirements

This is the amount you must pay each month to maintain your account in good standing. 

Payment due date

Finally, it is important to know when payments are due so that you do not incur late payment fees or damage your credit score by missing payments. 

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Final thoughts on tips to use a credit card

By understanding how to use credit cards – from different types of cards available to their associated fees and interest rates -you can make an informed decision when selecting a card that best suits your spending habits while helping you save money in the long run.