How to Use a Credit Card

There are so many people who have misconceptions when it comes to credit cards. We have been brainwashed to believe that credit cards create trouble and lead to debt. That is true. The misuse of credit cards can lead to trouble and debt. However, with the proper knowledge, you can successfully use credit cards to build your credit among many other things. 

How Do I Get A Credit Card?

There are two options when it comes to getting a credit card. You can either get a secured or unsecured card.

To obtain an unsecured credit card you must submit an application using your social security number and other personal information. The credit card company you are applying through reviews your credit history to determine if they will provide you with a credit card and how much the limit should be. In most cases, if you do not qualify for an unsecured card, you may qualify for a secured card. Also, the better your credit history and score are, the more money thy will provide you to use as credit.

A secured credit card requires you to provide a set dollar amount to the credit card company. The credit card company then uses this dollar amount as your credit limit. A secured credit card is usually for people who have no credit history or a bad credit history. The purpose of providing the money upfront is so the company has collateral in the event you don’t make your payments on the credit you have used. After consistently making your monthly payment on time, the money you put up for collateral is reimbursed to you and you now have an unsecured credit card.

Monthly Statements

 Each month you will receive a credit card statement. Your statement will show you how much of your credit you have used. It will also include your finance charges, payment amount, and due date.

Finance charges are usually where people get confused the most, so I will try to explain it as simple as possible. Finance charges are basically an equation using the balance on your card, your rate for purchases, and the number of days in your billing cycle. This will always be calculated for you and shown on your bill. This is not a set dollar amount and will change from month to month.

Making Credit Card Payments

One of the most important factors of having a credit card is making your payments on time. Your payment amount and due date are very important. You want to make sure you pay your bill in full and by the due date each month.

A great way to manage your bills is to set reminders for yourself. You can set a calendar alarm in your phone with the bill amount and due date. You can also write it down in a planner if you prefer, just make sure you don’t forget.

If you ever have any questions about the amount that is due, you should contact your credit card company.

Improving Your Credit Score 

You should only charge amounts that you know for sure you will be able to pay back. A good rule of thumb is that you should not charge it to your credit card if you will not be able to pay it back within 3 months. You do not want the outstanding debt to pile up and overwhelm you.

If you ever have extra cash at the end of the month you can make extra payments. Paying more than the minimum amount due will reduce the amount you pay in finance charges. Paying more than the minimum amount due will also pay your balance off quicker.

If you are using your credit card to build credit, the best thing to do is to use it to pay one bill each month, such as electricity. Using your credit card to pay a bill and then paying that balance in full each month will help you build your credit score.

Do not use your entire available. Creditors like to see that you have credit available but you are not using all the credit you have available. It is recommended to keep a balance between 10%-30% each month.

Having no credit can be just as damaging as having bad credit.

Using a credit card can be very beneficial to you as long as you use it responsibly.

7 thoughts on “How to Use a Credit Card

  1. I currently have no credit cards due to the credit mistakes when I was younger. Thanks for the post. I may decide to give credit cards a chance again!

    • iHeart Nelle

      A lot of people have bad experiences when they are younger and it affects how they manage their finances later on in life. If you feel like you are more responsible now, you should give it a try. No credit is just as bad as bad credit. Good Luck to you!

  2. Girl, I maxed out the credit cards I got in college and am just understanding these important lessons you mapped out. Thanks for sharing these gems because financial literacy is SO important.

    • iHeart Nelle

      Understanding how credit and finances work are very important and I don’t feel like it’s taught as much as it should be.

  3. Very interesting! You explained this really well, thank you. I don’t have a credit card (yet) but I’d definitely consider it.

    “Having no credit can be just as damaging as having bad credit.” – so true!

    • iHeart Nelle

      Ashtyn…I’m glad this helped. Subscribe or check back periodically for more posts on finances. Good Luck with rebuilding your credit.

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