Credit Cards

How to use credit cards

Learn how to use credit cards the best possible way, keep and improve your financial health.


Make the most out of your credit card without running into debt or excess fees

man using credit card for online shopping
Learn how to use credit cards. Source: Freepik.

Trying to figure out how to use credit cards? Credit cards are a secure and flexible way to pay for a number of things. There are numerous advantages to choosing credit over debit.

One big advantage is that you get to pay all your purchases at once by the end of the billing cycle. That gives you a clear picture of how much you have spent for that period.

Another one is the ability to spread the cost of major purchases by paying them in installments. Furthermore, credit cards are extremely useful tools for building credit.

However, if you do not use them wisely, credit cards can be a double-edged sword. Run up the bill for long enough, and it will snowball into unpayable debt.

In this article, you will find useful tips that will help you avoid such pitfalls and get the most from your credit card. So let’s get rolling.

The mechanics of a credit card

pile of plastic credit cards lies on wooden table, selective focus, top view
First, you have to understand how credit cards work. Source: Adobe Stock.

When you use a credit card, you are essentially borrowing money from the bank for a short period of time. At the same time, you are promising to pay that amount back to the bank by a certain date.

When you make your payment, you may or may not pay an additional amount. That additional amount is called interest, and it is charged whenever there is a risk of default.

young girl using credit card

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For example, let’s say you have to pay your credit card every 15th of the month. If you pay on the 16th, for a day the bank has to run the risk of you not paying for your card. 

For that risk, you will pay a certain percentage of the amount borrowed. The same happens when you carry a balance, which means you only paid part of what you borrowed.

As a rule, carrying a balance is something that should be avoided at all costs. But we will talk more about that later.

For now, you must know that your credit card issuer will assign you a credit limit. This limit is based on things like your income, account history, and credit score.

Some cards have lower credit requirements than others. For an example of this, check out the First Progress Platinum Elite Mastercard. 

Notice how the amount of credit a lender gives you is directly proportional to how much they trust your ability to repay.  

As you make purchases with your card, your available credit shrinks. As you pay out your balance, you free up credit. You can check all your credit card activity in your card statement.

Your credit card statement

Every month your credit card company will mail you your card statement. In it you will find information such as:

  • The total card balance
  • The available credit limit
  • Purchases made during the previous month
  • Minimum payment
  • Payment due date

As we have mentioned before, carrying a balance is a bad idea. As a rule, you want to avoid making minimum payments. These will add up with time and become a much bigger debt than it originally was.

Ever heard of APR? It stands for Annual Percentage Rate. This is the annual amount of interest you pay on your card when you delay payments. Some cards have variable APRs, and some even offer 0% for your first year as a cardholder.

For example, the Discover It Cash Back offers 15 months of 0% APR. Check it out!

But again, do everything in your power to pay your bill in full. This will save you money and help you build a solid credit history.

Important things to keep in mind

hands holding many credit cards
Pay attention to your credit card payments and other aspects Source: Adobe Stock.

Whenever you apply for a card, the credit card provider will run a check on your credit history. These checks can be soft or hard. A hard check will show up on your credit report and potentially affect your credit score.

A soft check, on the other hand, has no impact on your credit rating. Still, it serves the valuable purpose of providing an indication of whether your credit application will be approved.

Cards like the Milestone Mastercard are examples of cases when a soft check happens. Have a look!

Credit cards are not meant for those with a tendency to overspend. By no means withdraw cash using your credit card. This is one of the most expensive things you can do with it. 

Overspenders may exceed their credit limit. This on its own will cost you additional fees or penalties.

Remember that credit cards can be extremely convenient. But that same convenience can lure you into thinking you have more money than you actually do.

Key takeaways

Now that we have covered some of the most important points, let’s wrap it up into a few important topics.

Pay your bill on time

We can’t emphasize this enough. Not only does paying your bill on time help you build a solid credit history, but it also doesn’t cost you to do it. The opposite is also true: be late, and it will cost you.

If you have trouble remembering payment dates, most cards have a way for you to set up automatic payments. Do it now, and never miss a payment again.

Understand your card’s interest rate

Even if you get a card that offers a promotional 0% APR for the first year, you should watch out. If you carry a balance beyond the promotional period, you will pay the post-promotional APR on the amount that is left. 

There is something called the grace period. This is a period of about 20 to 30 days when you can pay off recent purchases interest-free. Take advantage of this, so you don’t pay interest.

Learn about your card’s fees

Credit cards come in a variety of shapes and forms, but fees are unanimous. Besides the annual fee, cards commonly have fees for:

  • Late payments
  • Returned payments
  • Foreign transactions
  • Cash advances
  • Balance transfers

Your card issuer will inform you about these fees. Make sure the annual fee (if you pay any) is worthwhile by comparing it to the rewards and benefits the card offers. 

Some cards don’t charge an annual fee. Also, if you plan to spend time overseas, there are cards that don’t charge foreign transaction fees.

Wrapping it up

Credit cards are an excellent way to make the most out of your money. However, use them wisely. If you are just starting out, we recommend you choose a credit card that fits into your finances.

The link below will take you to a good option.

thoughtful woman holding credit card

How to choose the perfect credit card? Learn how!

Are you confused, looking for a new credit card? With so many options, it is really not an easy task. But we'll give you a few tips about it in this post.

About the author  /  Danilo Pereira

Danilo is a copywriter with a passion for learning. Deeply interested in philosophy, politics and arts.

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