7 Best Practices for Credit Cards

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Having a credit card is convenient, but some pitfalls can come back to haunt you. There are, of course, ways to avoid problems. For example, most people know that they should pay their balances off each month to avoid paying interest. That’s a standard good practice.

But there are other ways to use credit cards to protect your precious credit score. Here are seven best practices for using credit cards to help you stay debt-free and improve your credit score.

Review Options Carefully

If you’re opening your first credit card or have had some credit bumps, you won’t be eligible for the best offers. You should look for credit cards designed for bad or fair credit. You'll be eligible for better cards once you’ve established a good payment record.

For those who have excellent credit, consider your spending habits. For those who travel or use their credit card to buy groceries, you'll want to look for a card with rewards.

Once you’ve chosen a card, check their terms and conditions. You'll want to know payment due dates, fees and any restrictions using the benefits.

Watch for annual fees and the annual percentage rates (APRs). Promotional APRs may change after a year.

Never Go Above 30 Percent of Credit Limit

Always use less than your credit limit. Watch your credit utilization. This is also referred to as credit usage. It’s the ratio of credit balance to credit limit. It’s the main factor in determining your Fair Isaac Corporation (FICO) credit score.

A FICO is that three-digit number between 300 and 850 that lenders use to determine if you qualify for a mortgage, credit card, or other loan.

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Your credit usage should never go above 30 percent. If it does, it will hurt you if you ever decide to buy a car or a house.

Analyze and Monitor Your Statement Every Month

There are several reasons to analyze your credit card. One obvious one is to check for fraudulent charges. These can rack up a lot of debt quickly. If you have a spouse on the same card, sit down together when it comes in and check it together.

Another reason is to look at your spending habits. Are you buying items that you want or need? What do you have to show for all the charges? Analyzing where you’re spending or wasting your hard-earned credit could help reduce expenses. Your credit card charges should be tied to your monthly budget.

This last one dovetails on the previous one. Look at your spending habits. Are you using the credit card to buy groceries or gas and then paying it off monthly? Consider looking for a credit card that gives you rewards.

Watch for Promotional Periods for More Rewards

Be aware of promotional periods. With new credit cards, they may offer enhanced rewards or zero percent financing during specific periods.

Even if you already have a credit card, you may be able to take advantage of additional rewards. If you are aware of these periods, they may be great times to make purchases you would have made anyway.

But ensure your balance is paid off once the enhanced reward periods end. Otherwise, you may have a hefty bill to pay.

Understand the Different Rewards

Consider what types of rewards are available. The three types of rewards are miles, cash back, and points.

Base which reward you want on your spending habits. If you travel, reward miles may be important to you. But if you’re using your credit card for everyday purchases, points or cash back will be more beneficial to you.

Most credit cards have some restrictions on how you can redeem rewards.

Treat Credit Card Like a Debit Card

When you pay your credit card bill, money comes from your bank account. Be aware of that when you make a credit card purchase.

Treat the credit card like a debit card. Never make a purchase that you couldn’t make with your debit card.

One way to do this is to keep a budget and designate what amount can go on your credit card monthly. The more you watch your spending habits, the more likely you’ll avoid running up a big credit card balance.

Don’t Cancel Credit Cards

Lenders want to see you’ve been predictable with your credit. That means using your credit card responsibly for a long time. So, keep your accounts open and active.

Don’t just open a card up to get the bonus and then cancel it. Avoid moving from card to card. Find one that meets your needs and stick with it.

Closing a credit card hurts your credit score. That’s because it’s no longer on your credit report, and it’s a factor that makes up a percentage of your score. Once it’s gone, the history of that card’s good credit is gone. It will no longer help your credit score.

Credit Cards Best Practices

If you want to live with less stress, avoid credit card debt by following best practices. It’s all about changing your mindset when it comes to spending. Using best practices for credit cards can improve your credit score. This ultimately will help your personal finances and contribute to a better life.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.