5 Tips for using your credit card responsibly

A credit card opens up a world of financial possibilities, such as being able to rent a car and reserve a hotel room without having a significant hold placed on your debit card. While a credit card can be a beneficial financial tool, it can also be an expensive financial deadweight if not used wisely. Knowing how to use your credit card wisely and responsibly not only saves you money, but it can also keep your credit profile in good shape.

Buy What You Can Afford

One of the most valuable credit card tips you can follow is to generally purchase only what you can afford. If you have the cash on hand to pay the bill in full, use the card for a purchase. In addition to avoiding the need to carry a lot of cash, using a credit card is a great way to utilize consumer protections in the event of a dispute, return, or other issue. The major card issuers offer robust buyer protection, often issuing a temporary credit in the event of a problem, especially if the merchant refuses to provide a refund.

Don’t take a cash advance from your card; this is an expensive loan, with higher interest rates and fees. There is no grace period, and interest starts accruing right away. These additional fees may push your balance closer to your credit limit, which can impact your credit score.

Stick to a Payment Plan

If you don’t have the cash for the item or service, but it’s an urgent purchase such as a car repair, go ahead and use the card. When making such a purchase, develop a plan to repay it as quickly as possible and stick to it. Credit card interest can mount quickly, especially if you only make the minimum payment. Try to pay as much of the balance as you can to keep the interest charges as low as possible. If you don’t need the item right away and you don’t have the cash on hand, save your money and purchase it then.

Get the Best Credit Card Deals

Aside from purchases, the biggest credit card expenses you can incur – and can control – are the interest rate and fees. Credit card companies sometimes offer attractive interest rates for cardholders with good payment records and good credit scores. Review your credit report on a regular basis to ensure there are no errors on your report that can give card issuers a chance to increase your card APR interest.

Pay On Time

Pay your bills on time, or early if possible, to make sure they are posted as on-time payments. By maintaining a great payment record, you can request a lower APR interest rate or even for the issuer to waive or reduce annual fees. Another money-saving benefit of paying on time is avoiding punitive penalty rates, or default rates. This higher rate can generally be reduced, or cured, when you make six on-time payments in a row following the late payment. Always ask the customer representative for this option, if needed; it may not be offered automatically.

Limit the Cards You Carry

Try to carry just two cards; it reduces the temptation to overspend, and it limits the risk of your cards being lost or stolen. When a credit card goes missing, call your card issuer immediately. You can dispute unauthorized charges, and the card will be frozen, preventing the thief from using it. A lost credit card can affect your credit score if you don’t report the loss within 60 days. There is a $50 maximum liability, but many issuers won’t hold you to it. After you report the theft to the three major credit bureaus, monitor your credit score to be sure any unauthorized usage or fraudulent accounts were not added to your report. You may want to consider hiring a credit score monitoring service to keep tabs on your score for a while.

To maintain control over your credit card usage, use it only when you can quickly pay the balance in full. Even for costly emergencies, develop a repayment plan and stick with it. By paying on time, you can maintain a good credit score and save a significant amount of money on higher interest rates and late fees.