How To Use Credit Cards Responsibly

How To Use Credit Cards Responsibly

Credit card companies are deemed evil by many, especially after racking up big bills and paying high interest. For the most part, irresponsible use of credit cards is what really gets people into trouble. About 41% of U.S. households have some kind of credit card debt, with balances averaging $5,700 according to a 2019 ValuePenguin report.

However, there are many benefits to using a credit card. The best part is you can take advantage of those benefits while staying debt-free, too. Responsible credit card use requires discipline. (If discipline is something you struggle with, then it may be best to stick to your debit card.) 

Before we get into how to use credit cards responsibly, let's first talk about how credit cards work and what some of their benefits are.

How do credit cards work?

Money on a credit card is essentially an advance loan. When you use your credit card for a transaction, the credit card company is loaning you money in advance. Usually, you will have a grace period of about 30 days to pay it back. This basically means if you pay your balance off in full before the grace period is up, you will not get charged interest. 

The trouble is, most people don't pay off their balances off and go over their grace period, resulting in them paying interest — this is how credit card companies make money.

If you can rein in spending and hold yourself accountable to your budget, there are three good reasons people use credit cards:


Credit cards are safer than debit cards and certainly much safer than cash. If your credit card is stolen, your account is protected by the Fair Credit Billing Act and all fraudulent charges are credited back to your account. 

Your debit card, on the other hand, does not fall under this law (instead it’s the Electronic Funds Transfer Act) and getting your money back can take up to several weeks depending on the situation. If more than 60 days have passed, there’s a chance you won’t get your money back at all.


Many credit card companies offer rewards like miles and cashback on your purchases or points that can help you save money on future transactions. However, keep in mind, carrying a balance that you can't pay in full each month is not worth any points no matter how compelling it may seem.

In addition to rewards, you might have some extra perks for using your credit card. Insurance for your car rentals is a common benefit. Some credit cards also cover the costs of TSA PreCheck or Global Entry. You just have to pick which perks matter the most to you.

Establishing and maintaining your credit

Creditors and lenders want to know what type of liability you represent when it comes to them giving you a loan, like a mortgage. They’ll look at your credit history and credit score, among other things. Your monthly credit card payments can help.

Not only are you a more attractive borrower if you pay your bills on time (and over time), you can also get the best interest rates possible which in turn reduces the amount of total interest you'll pay back on your loan.

How to use credit cards responsibly

Now that you understand what credit cards are and what benefits they can provide you, here’s what you can do to make sure you’re taking care of your finances.

Pay your balance in full each month

Avoid interest by paying off your credit card balance every month. Be sure you can afford the payment at the end of the month before you start spending on credit. This means being disciplined about how much you put on the card to begin with so you don’t find yourself being unable to afford the balance when the bill comes due.

If you must leave a balance, make sure it is under 30% of your total credit limit. Your credit utilization ratio, the amount of available revolving credit used, is a factor of your FICO credit score. Over 30% and your score will be negatively impacted. 

Don't skip payments

Do you have a large credit card balance to pay? Skipping payments will wreak havoc on your credit and is not good financial stewardship. 

Instead, come up with a debt repayment plan and pay as much as you can against your balance each month until it's gone. Next, stop using those credit cards until you pay off the balance and can get a firm handle on your budgeting and spending. The goal is to not carry a balance. 

You can also consider doing a balance transfer to take advantage of any introductory 0% interest offers and pay off your debt faster. Just make sure you’re able to pay off the balance before the period expires.

Pick a credit card with benefits that make sense for your lifestyle

If you are an active credit user and you have a firm handle on paying your bill in full each month, pick a card with a benefit like cash back or travel mileage rewards — something that you will actually use. Accumulating points or miles (and paying annual fees) for no reason is counter-intuitive.

You can find reviews of all kinds of credit cards on sites like NerdWallet and The Points Guy. Your network may also be a great resource and can sometimes refer you for special offers. 

Charge wisely

Using a credit card is not a bad thing. It's safer than cash, convenient and the rewards are a plus. However (I can't stress this enough) if you struggle with using credit cards the right way, then stick to using your debit card. The most important thing is to keep your finances in order, whatever that means for you and your wallet.

{Updated by Cristy S. Lynch}

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