Owning a credit card can make some people feel empowered. After all, everyone lives in a virtually cashless world where a high credit limit is prized.
But you must realize that your credit card is a double-edged sword. Use it right, and you’ll see how efficient your financial management will be. Abuse it, and you’ll experience an overwhelming amount of stress brought about by massive debts.
The first step to building good credit card habits is knowing that having a card doesn’t mean that you have instant cash to spend. The money that you spend using this card is just a loan that you have to pay back eventually. While this is basic information, a lot of people seem not to acknowledge it.
We’ve come up with a list of credit card dos and don’ts that will help you use your card properly. Here’s what you should do and not do with a credit card.
Table of Contents
Credit Card Dos and Don’ts: 17 Best Rules for Using Your Card
The Dos of Using a Credit Card
1. Think Twice Before Spending with Your Card
The act of swiping the card and signing the receipt can, for some people, feel more bearable than having to part with their hard-earned cash. Thus, people find it easier to spend more on their credit cards than they would with cash.
Here are the best rules to keep in mind, so you can curb the urge to overspend with your card:
- Give yourself 48 hours to decide. When you’re about to use a credit card to purchase something, wait 48 hours. This will let you deliberate on whether or not you actually need it.
- “Budget” your credit card. Every time you pay with a credit card, ask yourself: “Can I pay for this in cash?” If the answer is no, don’t proceed with the purchase, though the rule might be bent for paying on layaway.
2. Know Your Due Dates
First things first. Always make sure that you pay on time. Otherwise, you’ll find yourself covering late payment charges and other penalties. With that, you should know all your due dates.
To avoid missing payments, set up your credit card’s auto-payment feature. But if you want to pay manually every month, just set up a bill payment reminder.
In case you’re using multiple credit cards, consider consolidating your debts via balance transfer. This works by transferring all your other credit cards’ balances to one credit card. That way, you’ll have only one due date to remember. However, make sure that the credit card receiving all the balances has a lower interest rate and processing fees, so you can save money.
3. Pay More Than the Minimum Amount Due
Credit card providers always set minimum payment requirements. On your end, making minimum payments may make you feel that you’re being a responsible credit cardholder. But this technique may work against you. When you pay the minimum amount due, the remaining balance will incur interest in the next billing cycle. And the interest will grow along with your balances.
So as much as possible, pay more than the required minimum payment (Ideally, pay off the total outstanding balance, so you won’t be charged an interest next month). That way, you get to cut the life of your debt, interest, and other charges short.
4. Monitor Your Credit Card Transactions—Always!
Even if your credit card payments are automatically debited from you, you should never ever ignore the billing statements you receive every month. Make sure that all the transactions reflected in the statement are actually authorized by you. By doing so, you’ll spot any signs of fraud. Checking your credit card balance will also inform you about the changes in your interest rate and other fees.
5. Get Another Credit Card Only When You’re Financially Healthy
If used correctly, a credit card is your door to a life of efficient financial management. With that, you should get another credit card only when you’re financially healthy and ready.
If you know that you’re an impulsive buyer or a shopaholic, you must deal with those issues first before you get a second card. Stick to your existing card and manage your outstanding debts, if any. Otherwise, you’ll end up in financial ruins.
6. Make Sure That Your Account is in Good Standing
One good way of making sure that your account is in good standing is by paying for your credit card bill diligently. This means that you shouldn’t miss your due date. When your account is in good standing, it will be reflected in your credit score. And when you have a good credit score, you have better chances of getting handsome and zero-interest loan packages should you apply for one in the future.
7. Take Advantage of Rewards, Promos, and Discounts
Every year, credit card companies offer a multitude of rewards. These may come in the form of cash back, airline miles, free gas, points (which can be redeemed for freebies and other perks), and discounts in delivery services (e.g. GrabFood and Foodpanda).
Use these credit card rewards to save money. For example, if you’re using a card to shop for groceries and pay utility bills, take advantage of rebates from a cashback credit card, which allows you to refund 0.2% to 6% of your monthly purchases. However, always check the conditions, such as minimum spending requirements.
The Don’ts of Using a Credit Card
1. Don’t Max Out Your Credit Card
Maxing out your credit card means that you will incur a massive debt. Always remember that the way you use your credit card will affect your credit score. A huge debt may impair other aspects of your finances. As a rule, you need to stay within 30% of your credit limit not just for maintaining your credit score but also for making sure that your debts are under control.
2. Don’t Use Your Credit Card as a Substitute for Cash
Keep in mind that your credit card is not a cash card. Don’t use it to buy your daily necessities and cover home expenses just because you’re short on cash. The debt you incur this month will take the payment from your next month’s income. This will put you in a vicious cycle, and getting out of it often proves to be challenging.
3. Don’t Use Too Many Credit Cards All At Once
Having too many credit cards means that you have multiple credit limits at your disposal. But this is a huge responsibility on your end, especially if all your credit cards are active at one single time. So if you think you can’t handle multiple credit cards, use just one card. Or better yet, just keep a card or two. Multiple active accounts will only tempt you to spend beyond your means.
4. Don’t Take a Cash Advance When It’s Not Necessary
Through a cash advance, you can withdraw money from the ATM using your credit card. But remind yourself that the withdrawn money is not yours! It’s actually part of your credit line, which means the bank is lending that amount to you.
A cash advance is supposed to be used for emergency purposes, so as much as possible, you must never use it for other expenditures. Banks and credit card companies often remind credit card users that cash advances incur high-interest charges and upfront fees.
5. Don’t Be Attracted to High Credit Limit Offers
Credit card companies won’t stop promoting attractive offers, such as high credit limits and exclusive perks. Even if you’re suffering from bad credit or you’re dealing with an existing debt, you’ll still be bombarded with these enticing packages. If you receive a seemingly exclusive offer in the mail, ask yourself this: “Do I really need this right now?”
6. Don’t Use Your Credit Card When You’re Emotional
Retail therapy is one way of making oneself feel better. And it’s become much easier with the help of credit cards. But remind yourself that shopping or spending is just a short-term cure for your emotional woes.
On the other hand, don’t use your credit card if you’re too happy or excited about a prospective big-ticket purchase. Give yourself some time before you spend; waiting things out within a day or so will help you determine if you really need that new smartphone or flatscreen TV.
7. Don’t Spend Just for Rewards
In case you don’t realize yet, rewards just look attractive on paper. The truth is, they’re never free! You have to spend money before you get them. So, if your only motivation for using your credit card is to get rewards, then you’re using it wrong. In the end, the amount of your debt will outweigh the value of your rewards.
8. Don’t Use Your Credit Card If the POS Looks Suspicious
Fraudsters and thieves can steal credit card data through skimming. If you think that an ATM or a credit card POS looks suspicious, then don’t use your card with it.
In case a fraudulent transaction happens using your credit card, know that it is never your fault. However, the investigation process that comes after it may take a lot of your time. It may even stress you out.
9. Don’t Forget to Settle Your Credit Card Debt Before Applying for Any Loan
Unsettled credit card balances may affect the approval and interest rates of certain loans, as they have an impact on your credit score. Loan companies need to make sure that you have the capacity to pay back, which is determined through your credit score.
So, if you’re applying for a home loan or car loan, deal with your credit card debts first for a chance to get a low-interest offer.
10. Don’t Accept a Credit Line That You Know Will be Difficult to Manage
In other words, don’t bite off more than you can chew. If you’re struggling with the existing bills right now, it is highly likely that you can never afford a high credit line. If you insist on getting it despite your situation, you’re just putting yourself in financial quicksand.
And even if you’re offered a high credit line due to your responsible payment, ask yourself twice if you need it. Assessing your repayment capacity and present needs carefully will help you arrive at a sensible decision.
Owning a credit card empowers you as a consumer. It makes both in-person and online transactions not only convenient but also rewarding. However, a credit card doesn’t make you rich or financially powerful. Keep in mind that each swipe is just a loan that you’re supposed to pay back.
These credit card dos and don’ts are essentially anchored to these two tenets: first, live below your means, and second, spend wisely.
-  How to Live Below Your Means Without Feeling Deprived
- Photos from Freepik
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