Credit cards are a powerful financial tool. When used wisely, credit cards can help you build credit, manage expenses and offer rewards programs like cash back, points or miles. So, the smartest way to use a credit card is to balance convenience with responsibility, making sure your spending supports your financial goals.
Let’s explore how to use credit cards and what habits can help you get the most out of them.
Always pay your statement balance in full by the due date when you can
A smart way to use a credit card is to pay your statement balance in full by the due date. This helps you avoid interest charges and keeps your repayment history strong. Setting up alerts can make it easier to stay on track of credit card due dates. If you can’t pay your statement balance in full, try to pay more than the minimum due to keep interest costs down.
Take advantage of rewards programs
Another way to make the most out of credit cards is through rewards programs. Depending on your card, you might earn cash back, points or miles on purchases. Each rewards program works differently, so review your card’s terms to make sure you’re getting the most out of it.
Consider balance transfer credit cards
A balance transfer credit card allows you to move existing high-interest debt to a new card, often with a low introductory APR. Most cards typically charge a fee for balance transfers, usually a minimum fee amount or a percentage of the amount transferred, whichever is greater.
A balance transfer card can be a good option for consolidating debt. Paying down your transferred balance during the promotional period can save you money and simplify your payments.
Think twice before closing credit cards
Multiple cards can expand your total available credit and provide different benefits. But closing cards can reduce your total available credit, raising your credit utilization ratio and potentially lowering your credit score.
Keep your credit utilization low
Always try to keep your credit card balances well below your limit. Credit utilization — how much of your available credit you’re using — is a major factor in credit scores. Aim to keep this under 30% across all cards to help maintain a strong credit score.
Smart credit card tips: Frequently asked questions
Is it smart to have more than one credit card?
Yes, it can be smart to have more than one credit card if you can manage them responsibly. Multiple cards may increase your total available credit and provide different benefits, but they also require careful tracking.
How can I use credit cards to help build credit?
You can use credit cards to help build credit by making payments on time, avoiding high balances and keeping accounts open to lengthen your credit history.
What are some sound credit card habits to help avoid debt?
Sound credit card habits include paying your statement balance in full and on time each month, setting up alerts for due dates and avoiding maxing out your limits.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
