The average American has at least two credit cards. But, the average American household also has over $6,000 in credit card debt, too. While credit cards are a great way to build your credit and unlock lots of financial doors that lead to better loan rates and more rewards, you have to learn how to use a credit card to really reap the benefits of what they offer you.
From making sure you make payments on time to figuring out which credit cards to apply for, learning how to use a credit card wisely will pay off immensely in the long-term. Don’t have credit at all? Check out our picks for the best secured credit card so you can start to build your credit to become eligible for unsecured credit cards.
1. Apply for the Right Credit Card
As mentioned, if you don’t currently have credit then you’ll want to apply for a secured credit card. These cards are designed for people with no credit or bad credit as they require that you put down a deposit to essentially “secure” the card. After using the card for a few months and making payments on-time, you’ll find that your credit score will improve and you’ll be eligible to apply for better cards.
Then, do your research. The best secured credit cards aren’t the same as the best regular credit cards. Think about your lifestyle and spending habits. If you never eat out at restaurants then a card that’s optimized for cashback when you spend at restaurants won’t really benefit you. In general, it’s best to look for cards with low or no annual fees, a cashback matching program if possible, and a low APR.
2. Learn How to Use a Credit Card for Smart Purchases
When you’re learning how to use a credit card, learning what to purchase with it is one of the biggest aspects of using it wisely. While it can be tempting to make large purchases on a card with a $10,000 limit, remember that you’ll eventually have to pay that off. So, don’t go crazy. Think of your credit card as a debit card and only charge what you know you can pay off immediately.
If you’re just getting started out with a college credit card, try to use it for simple purchases such as gas and your weekly groceries. This makes it easier to remember to pay it off each month and will prevent you from racking up lots of credit card debt. Remember, even though you have a high limit, you’ll still have to pay interest on whatever you charge if you don’t pay it off on time.
3. Schedule Reminders to Make On-Time Payments
Life is crazy and it’s easy to miss a payment or two. It happens from time to time, but it shouldn’t. Schedule reminders on your phone or on your computer to ensure that you remember to pay off your credit card bill each month. Most credit cards’ online portal will allow you to schedule reminders as well via text or email. If you know you forget things easily, set up both reminders!
Or, if you can, it’s great to get into the habit of making payments at the end of each week. This might sound excessive, but it’s a great strategy for those who are just starting to learn how to use a credit card and need to establish strong financial habits.
4. Check Your Credit Score Periodically
One of the biggest perks of using a credit card is the fact that you’ll be improving your credit score as long as you’re using the card wisely. This means that it’s a good idea to check your credit score periodically, not only to see if your score is going up, but also to ensure that there aren’t any mistakes on your credit report.
Most financial apps that let you check your credit score, like Mint, also have built-in budgeting tools that will give you a comprehensive overview of your entire financial situation and spending habits. This makes it easy to see where you’re spending too much money, when you make loan payments, and how much you’re charging to your credit card each month.
5. Stick to a Budget
While you’re checking out your credit score in the budgeting app above, why don’t you take time out to create a budget for yourself? Crunch some numbers and try to account for every penny you earn, whether that means putting it into a savings account, paying off your loans, or spending it on food and entertainment.
Then, once you have your budget, figure out how much of that you’ll charge to your credit card and don’t charge anything else. This will prevent you from spending more than you’re able to pay off each month.
Earning Cash Back with Cheese
If you can learn how to use a credit card wisely, it’s a great way to build your credit. However, it’s not the only way to earn cashback. A debit card can help you save more while spending, at least the Cheese Debit Card can.
Our FDIC-insured debit card comes with $0 in fees on top of lots of great savings opportunities. In fact, you can earn a lot of cash back for simple spending. And, while it won’t improve your credit score, it certainly won’t hurt it, either. Interested in a Cheese debit card? Click here to sign up!