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 with good habits and responsible use, you might use one to build credit.

What you’ll learn:

• Learning how to use a credit card responsibly can help you better manage your finances and may positively affect your credit scores.

• Familiarizing yourself with 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 low can help you build and maintain a positive credit history.

• By paying off your statement each month, you may be able to avoid paying interest charges.

A credit card is a plastic or metal card that lets you make purchases in person, over the phone or online. 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. 

Paying off your balance every month is one way to avoid interest on new purchases. If you make only the minimum payment each month, you’ll be charged interest on the balance. If you pay less than the minimum, it could result in late fees and penalty APRs being applied too. 

With responsible use, a credit card can be a helpful tool for building credit. And good credit scores can help you achieve your long-term personal finance goals. So keep these tips in mind:

When you open a new credit card account, read through your card’s terms, including the customer agreement and the account opening disclosures. This way, you’ll know what to expect with fees, interest rates, billing cycles and more.

Familiarizing yourself with common credit card fees and annual percentage rates (APR) 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 the Consumer Financial Protection Bureau (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. 

In fact, late payments can stay on your credit report for up to seven years. Late credit card payments can also lead to late fees and higher interest rates. You could consider setting up automatic payments or electronic reminders to help you avoid missing payments.

Making minimum payments by the due date every billing cycle helps you avoid penalties and fees. And paying the minimum keeps your account in good standing. But if you pay only the minimum, you’ll carry a balance. And you’ll be charged interest on that balance.

Using only the credit you need can help you stay below your credit limit. That affects your credit utilization ratio, which is a measure of how much available credit you’re using across all your revolving credit accounts. The CFPB recommends keeping your credit utilization below 30%. If you think you might need extra help limiting your spending, consider making a budget.

Using credit responsibly by doing things like making payments on time each month should keep your account in good standing. And sometimes, practicing good habits might lead your issuer to offer a higher credit limit on your card. 

Though you’re not required to accept an offer to increase your credit limit, you may want to consider it. Credit line increases raise your total available credit, which may help lower your credit utilization. And a lower utilization ratio is generally a good thing for 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 any time 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. Thankfully, many card issuers, including Capital One, offer $0 liability for unauthorized charges. At Capital One, you can also instantly lock your credit card with just a few taps on the Capital One Mobile app. And if 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. When you do, your issuer will likely deactivate your old card and account number so no one else can use it. You can also tell the issuer if you believe you’re a victim of credit card fraud and there are purchases on your account that you didn’t make.

If you’re juggling multiple credit card payments, there may be a way to consolidate your debt into a single payment—sometimes with lower interest. One way to do that is through a balance transfer. 

Completing a balance transfer may help you lower your monthly interest payments and could make it easier to keep track of your total spending. But keep in mind 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 perks and benefits can ensure the fee is worth it.

Here are some more frequently asked questions first-time credit card holders ask.

Whether you’re establishing or rebuilding credit, 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 current and future financial goals.

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