Improve Your Credit Score

How To Use a Credit Card Like A Responsible Adult

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Used properly, a credit card can have all sorts of benefits. Used improperly, it can drag you into bankruptcy.  A credit card can be a blessing or a curse. Some people refuse even to touch one. But if you know how to use one, it is a tool like anything else.

Why You Want a Credit Card

There are a lot of good reasons to have a credit card.

Sign Up Bonuses

Because there are so many credit cards to choose from, there is a lot of competition between them. One of the best ways to attract new customers is with fat sign up bonuses. The points acquired through a sign-up bonus can be cashed in for things like free air travel, free hotel stays, and statement credits.


You accumulate points when you spend on a rewards credit card that can be turned into the same things we listed in the sign-up bonus section but just having a particular card comes with perks. Things like airport lounge access, rebates when you sign up for Global Entry and TSA Pre-Check, free checked bags, and cash back on every dollar you spend.

Grace Period

If you pay for something in cash, the money is gone immediately. When you pay with a credit card, you have to the due date to pay for the purchase. You should never spend money you don’t have on a credit card but if you only get paid once a month or your income is sporadic in the case of a small business owner or freelancer, having those few extra weeks for the money to come in can be helpful.

Consumer Protections

Many credit cards come with certain consumer protections. If you buy something that is lost, damaged, or stolen, your credit card may ensure it. The dollar amount and amount of time your item is covered for differs by card, but it’s not only the fancy rewards cards that provide this so read your fine print.

If you dispute a charge on your card, the credit card company will go to bat for you against the vendor. The burden is on the vendor to prove the charge is legitimate. Until they do, most cards will remove the cost from your account. If you use a debit card, the burden is on you to prove the charge was not legitimate.

Fraud Protection

If your credit card is stolen or hacked, you are only responsible for the first $50 in charges. Debit cards offer similar protections but only if you notify the bank within 48 hours. Fail to do that, and you can be held liable for the first $500 in charges.

It also takes a few days for the money from those charges to be reimbursed by the bank which means you may have no access to cash. There is no such worry when your credit card is hacked. It’s the bank’s money missing, not your own.

Price Protection

If you buy something and see if, for a lower price within a certain amount of time, your credit card will refund the difference in price.

Travel Protections

When you pay your travel expenses with a card that offers travel protections you can be compensated for a canceled or interrupted trip, lost or delayed luggage, and even accidental death or dismemberment. Your card may also provide rental car insurance.

Pay Over Time

If you have a big purchase that can’t wait, like a new water heater or a car repair but you don’t have the cash, you can “borrow” the money interest-free with a 0% APR credit card.

The 0% interest rate won’t last forever, but there are some cards extending it as long as 24 months. Just be sure to pay off the entire balance before the 0% period is over or the remaining balance is subject to the new APR.

Emergency Fund

Your credit cards are not meant to be your primary emergency fund. You should ideally have 3-6 months worth of expenses in your checking account for that.

But if something catastrophic happens, a natural event causes major damage to your roof, for example, it might cost more to repair it than you have saved. Hopefully, insurance will cover it, but it could be months before you see that money.

You can’t live without a roof in the meantime so you can charge the repairs to a credit card. It’s not ideal, and you may have to pay some interest, but it’s better than being homeless.

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How to Choose a Credit Card

With some many cards to choose from, how do you decide?

What Perks You Up?

Decide what perks you are most likely to use. People sometimes get dazzled by the travel benefits of a certain card, but in reality, they don’t travel enough to get much value from it. A cash back card might be a better choice.

The cash back cards come with different rewards too. Some give more points for groceries or dining out than other categories. Some give a flat amount of points for all categories; some have categories that change quarterly. Look at your budget and see where you spend the most money. Choose the card that rewards that.

Annual Fee

Some rewards cards have an annual fee. This can be worth it if you take advantage of the rewards but if you don’t think you will choose a card without the fee.


If you have debt on another card you would like to pay off, choose a card with a long 0% APR introductory period and transfer the balance to the new card. You can pay off the debt much more quickly when you aren’t accruing interest.

No Forex

If you travel internationally, make sure your card doesn’t charge a foreign transaction fee; it can be as much as 3% which adds up to a long trip.

Ding Ding Ding

Each time you apply for a credit card, your credit score takes a small, temporary ding. But a ding none the less so before you apply for any card, see what your chances of being approved are.

If you don’t know what your credit score is, you can get a ball park number at Credit Karma. The site will also show you a list of cards you can probably get with that score so be sure only to apply for cards that you have a shot at getting approved for.

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What Are The Golden Rules of Using a Credit Card?

There is no trick to using a credit card in a way that doesn’t hurt you financially and doesn’t hurt your credit score.

Pay in Full

Pay your balance in full every month or a day before the due date. When you don’t pay the balance in full, you are charged interest on whatever you didn’t pay. If for some reason you can’t pay the full balance, still pay at least the minimum due on the day it’s due or before.

You’ll still be hit with interest, but at least your credit score won’t be hurt because of a late payment. Tools like Tally can help you out if you can’t be trusted.

Keep in Under 30

Part of your credit score is based on utilization, how much of your total available credit you’re using. You want to keep usage under 30%. So if you have a limit of $10,000 across all of your credit cards, you don’t want to have a balance higher than $3,000 total.

Check Your Charges

When you pay your balance each month, be sure to go through the charges. We can get in the habit of just paying the balance online without going over the statement. You may find charges you didn’t make or notice recurring charges for things you no longer use and want to cancel like old gym memberships or magazine subscriptions.

Take Advantage

Read the fine print when you receive a new credit card and make sure you’re taking advantage of all the perks offered to you. A lot of people don’t realize how many benefits come with their credit cards, especially the travel and price protection benefits.

Advance Warning

If you’re traveling, call your credit card company and let them know. Sometimes if they see charges from places far from where you usually spend money, they will lock the card. This is a good security measure, but it can be a headache if you’re traveling.

How Not to Use a Credit Card

Gimme Gimme Gimme!

When you get approved for a credit card, you will start getting offers from lots of other credit cards. Don’t sign up for any old card. There is nothing wrong with having more than one card.

You could have a good travel card, a good cash back card, and a Visa or MasterCard if your main card is an American Express because some places don’t take AmEx. But you don’t need a wallet full of cards.

I’m Rich!

Your credit cards are not free money. Don’t charge more than you can afford to pay at the end of the billing cycle unless it’s an extraordinary situation. Wanting to go on a vacation you can’t afford is not such a situation.

You Forgot

Don’t miss a payment simply because you aren’t organized. Set up alerts on your phone for a few days before the due date and schedule them for a time when you will be in front of a computer to make the payment.

Save the Date

Most cards will allow you to choose your payment date. Choose a date that’s easy to remember, the 1st or the 15th maybe, but make sure you don’t have so many due dates clumped together that you can’t pay all of the bills.

It’s Not an ATM Card

Don’t take cash advances on your card. You will be charged a fee for doing so, either a flat fee or a percentage of the amount you withdrew. The APR on a cash withdrawal is almost always higher than even the regular APR which is already usually in the high teens.

There is no grace period on cash withdraw. When you purchase your card, interest doesn’t start accruing until the grace period is over. If you pay it off before that, you won’t pay interest. When you take a cash advance, the interest starts accruing the moment you withdraw that money.

If your credit card company sends you checks, don’t use them. It’s the same thing as taking out a cash advance, and all the same horrible terms described above apply.

Throw it in a Drawer

Don’t open a card and then never use it. The card company may close your account for non-use which can lead to an embarrassing situation when you finally try to use it, and it can hurt your credit score because it changes your utilization and possibly the length of credit history.

It’s okay not to use a particular card very often (unless it has an annual fee) but make sure you use it once in a while. You can make sure your account isn’t closed by putting a recurrent charge on the card and setting up auto-pay.

There are some persistent myths about credit cards out there. They simply aren’t true and will hurt your finances and credit score.

You’ll Die in the Poor House

Some people believe that any use of a credit card is a ticket to financial disaster. And for some, that’s true. But credit cards are kind of like alcohol. If you have a drink or two at dinner, it won’t hurt you. If you have had a drinking problem in the past, it’s better to refrain.

Some people can’t use credit cards responsibly even if they understand how to. For those people, credit cards are a bad thing. For the rest of us, used responsibly, they are nothing to be afraid of.

Closing Cards

People think that if you close a credit card you have paid off or are not using that it improves your score. It does the opposite. It changes your utilization and length of history if it’s one of your older cards. Leave it open and use it occasionally as we described above.

Carry a Balance

I don’t know where this one started, but it refuses to die. If you leave a small balance on your credit card, it improves your score. This is blatantly untrue. You will be charged interest on the unpaid balance, and it hurts your utilization.

Nothing to Fear

Credit cards are only dangerous when used irresponsibly. If you handle them well, they provide a lot of advantages and can even make life less expensive. Choose the right cards for you, use it well and you won’t have to worry about ending up in the workhouse.

Show Notes

Tallgrass Brewing Buffalo Sweat:  A sweet, oatmeal cream stout.

Credit Karma:  Get your credit score for free.

Extra Pack of Peanuts:  Learn how to churn airline miles.

LMM How to Improve Your Credit Score:  Hacks to boost your score fast.

LMM Best Travel Cards:  If you want free flights and hotels, these are the best cards.

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Candice Elliott - Senior Editor Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.

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