How do I properly use a credit card?

There are three things you need to do to use a credit card responsibly: 1) compare credit cards to find the best card for your needs (and avoid having to apply repeatedly); 2) don’t spend more than you can afford to repay; and 3) pay at least the minimum amount required by the due date each month. It’s as simple as that. And as long as you use credit cards responsibly, they’ll help you build credit and continue improving your credit score over time.

If you really want to use a credit card wisely, you’ll not only pay your monthly bills by the due date, but you’ll pay them in full to avoid interest. Using less than one-third of your credit limit will also help take your credit card use (and your credit score) to the next level.

If you don’t trust yourself to use a credit card responsibly, the best thing you can do is open a credit card account and lock it away somewhere (after setting up automatic payments for any fees it might charge). Just having an open credit card account will benefit your credit standing. So not having a credit card is actually irresponsible as far as your credit score is concerned. With all of that being said, far too many people still make costly credit card mistakes. So it’s worth recapping the simple principles that go into using a credit card responsibly to make sure you have things straight.

How to Use a Credit Card Responsibly:

1. Compare credit card offers. Find the right combination of rewards, rates, fees and approval requirements for your needs. Choosing wisely the first time will also help you avoid multiple applications in a short period of time, which can temporarily damage your credit score.
2. Pay your bill on time every month. You can set up automatic payments from a bank account to make sure this happens. Payment history is the biggest factor in your credit score.
3. Avoid interest whenever possible. Paying your full statement balance each month is the most responsible and least expensive way to use a credit card.
4. Review your transaction history. You’ll be able to spot fraudulent charges, should they ever appear. And regularly reviewing your spending is key to making sure it doesn’t get out of hand.

Most people could stand to do a bit less spending, considering the average household has more than $8,000 in credit card debt. And racking up big balances is how you get into big trouble with credit cards. You’ll waste a lot of money on interest, for one thing. Your debt could also become too expensive to keep up with, leading to missed payments and credit-score damage. That’s why it’s so important to make a budget and set up autopay.

You can find plenty of additional pointers in WalletHub’s New to Credit Guide, too. And you can learn more about what not to do from our list of the biggest credit card mistakes.

Recipe for using a credit card responsibly: 

3 tbsp. low utilization
1 lb on-time payments
2 cups don't treat it like free money