The Dos and Don'ts of Using a Credit Card
Credit cards get a bad rap sometimes, primarily being associated with mountains of debt or unsolicited junk mail. But when they’re used responsibly, credit cards can actually be a powerful financial tool. Here are some ways to put those credit cards to smart use.
Do find a card with a good interest rate and no annual fee.
Credit cards are notorious for having some of the highest interest rates on the market. By staying aware and informed, you should be able to find low-interest options or deals. Like our special low rate on selected cards right now!
Do research the reward options.
Rewards are tempting. Cash back, travel points, free stuff—it can all trick us into thinking that our purchases are worth it to earn more. But make sure the rewards are right for you, or necessary. If you’re someone who travels a lot, a great miles rewards card could be perfect. For most of us, however, a rewards program, no matter how great it seems, may not actually add enough value to justify the spending.
If you are going to use a card to rack up the rewards, get into the habit of paying off the card immediately after each purchase. You’ll reap the rewards without accruing the debt.
Don’t use credit cards for bills.
If you’re using credit cards to pay bills, it’s likely that your budget needs tweaking. You should be paying bills with money you already have. By putting them on a credit card, the interest rates will make your electric bill suddenly shockingly higher.
Read more about how I got caught in this loop, and how I got out.
Do use credit cards for big purchases.
Credit cards can be great for a large sum of money, because then you’re able to spend without interrupting your immediate cash flow. You can pay it off a little at a time, as you get paid or as you have the cash, as long as you pay it off in time to avoid being charged interest.
Do use credit cards overseas.
When you’re traveling, use a credit card to protect against fraud. Using a credit card keeps your checking account funds safe, so if you do lose your card in a faraway land, you won’t compromise your “real” money. However, some credit cards charge up to 3% on foreign transactions fees. Look for a card like our Visa Signature® card that has no foreign transaction fees.
Before you run out and sign up for another credit card or start swiping yours for smart purchases, make sure your current debt-to-income ratio allows for that. If your first step is paying down that debt, check out these tips.