How to use a credit card responsibly: 10 tips

There’s a lot to like about credit cards. You might use them instead of having to carry cash. You might get rewarded for making purchases. And you could use one to build credit if you use it responsibly.

What you’ll learn:

• Responsible credit card use builds good credit, which can help you achieve your financial goals.

• Knowing your credit card terms and conditions can help you understand how to keep your account in good standing.

• Making consistent, on-time payments and keeping your credit utilization ratio low can help you build and maintain a positive credit history.

• Monitoring your credit card statements and credit reports can help you identify potential issues.

A credit card is a plastic or metal card that lets you borrow money to make purchases. It’s a type of revolving credit or open-ended loan that typically remains open as long as the account is in good standing.

When a credit card issuer approves you for a credit card, it’s lending you a line of credit up to a certain credit limit. As you use the credit card, your credit card balance increases and your available balance decreases. As you make payments, your available credit is restored.

You can use your card to pay for things in person, online or by phone.

• In person: Swipe, insert or tap the card at the point-of-sale (POS) system.  

• Online: Select the card payment option at checkout on the merchant’s website or app and enter details including card number, CVV number and expiration date. Virtual card numbers might also be an option.

• By phone: If you’re giving your card details over the phone, it may be helpful to review safety tips from Bankrate first to help protect your personal information.

You may also have the option to add your card to a digital wallet so you can pay for things without the need to use your physical card.

With responsible use, a credit card can be a helpful tool for building credit. And good credit scores can help you achieve long-term financial goals. Here are some tips for using your credit card responsibly:

The Consumer Financial Protection Bureau (CFPB) says “most consumers don’t read their credit card agreements.” But reading your card’s terms can help you understand what to expect with fees, interest rates, billing cycles and more. You can find your credit card’s key terms and conditions in the Schumer box, a standardized table that’s included in all credit card agreements, statements and card offers.

Familiarizing yourself with common credit card fees and annual percentage rates (APRs) can be a helpful part of understanding how to use your card responsibly. For example, you may be charged late fees if you miss monthly payments. There could be transaction fees or higher interest rates for cash advances. And some cards come with an annual fee.

As CFPB explains, you should make your payments on time, every time. That’s because your payment history is an important factor when it comes to your credit scores. Late payments can stay on credit reports for up to seven years. Late payments can also lead to fees and higher interest rates. You could consider setting up automatic payments or electronic reminders to help you avoid missing payments.

“You do not have to pay any more than the minimum amount shown on your statement,” the CFPB says. But the agency adds that “the more you pay each month, the less interest you will pay over time.” Making at least the minimum payments every billing cycle also helps you avoid penalties and fees.

Credit-scoring models analyze your credit utilization ratio, which is a measure of how much credit you’re using versus how much you have available. And it applies to all active credit card accounts. The CFPB recommends keeping your credit utilization below 30%.

Practicing good habits might lead your issuer to offer a higher credit limit on your card. Or you could request one on your own. You’re not required to accept an offer to increase your credit limit. But if you maintain your spending levels, a higher credit limit could lower your credit utilization and help your credit scores.

Regularly checking your credit card statements is a great way to keep your spending top of mind. It can also help you spot transactions you don’t recognize. And that could help you spot fraud.

Capital One cardholders can set up instant purchase notifications in the Capital One Mobile app. The notifications alert you whenever a transaction is approved on your card. You can set up notifications to tell you the amount of purchases and information about merchants. Capital One can also help protect your account by monitoring your transactions and reaching out when it spots something that seems unusual.

It can feel unsettling if you don’t know where your card is. But Capital One cardholders aren’t liable for unauthorized charges. And at Capital One, you can instantly lock your credit card with just a few taps in the mobile app. When you find your card, you can unlock it just as easily. If you’re unable to find your card or discover someone has your account number, report your card lost or stolen.

If you’re juggling multiple credit card payments, a balance transfer could be a way to consolidate debt into a single payment with lower interest. By lowering your monthly interest payments, you could simplify payments and make it easier to track your spending. You generally can’t transfer balances between cards from the same issuer. And there may be fees to transfer balances.

If you have a cash back or travel rewards credit card, consider ways to get the most out of it. That could mean finding one that matches your spending habits so you can maximize the benefits of your card. If your card has an annual fee, understanding the card’s benefits can ensure the fee is worth it.

Here are some frequently asked questions about using a credit card responsibly.

A credit card can be a valuable tool when used responsibly. Creating good habits like making on-time payments, using only the credit you need and monitoring your credit can help you work toward your financial goals.

You can see a few card options by checking out Capital One’s credit cards for fair credit. You could also see whether you’re pre-approved without affecting your credit scores.