How To Use A Credit Card Smartly

Written by Nancy Altilia

Wednesday, January 2nd, 2019

I was one of those kids who got a credit card while I was still in my teens. A few (OK, several) decades later, and I still remember the advice my banker gave me: "Plan your spending so you can take almost two months to pay it back." She would make any big purchases the day after her statement was issued so the item did not appear until the next month's credit card statement. That gave her another few weeks to pay without any interest charges. She was using the card to borrow over the short term, at no cost. That's a power tool.

Like her, I don't use my credit card for anything I can't pay off promptly. In fact, it's become a quest to always use the credit to my advantage and never pay interest.

To harness the power of a credit card, I have formed a few simple habits:

  • Pay the balance off every month. I only use a credit card for things that are already in my budget. I keep a rainy-day fund so I don't need to put emergency expenses on credit. Paying credit-card interest is a very expensive way to borrow money, and it is best to avoid it.
  • Check the outstanding credit-card balance several days before every due date. If there are any surprises, there's still a chance to curb spending before the statement is issued. This is especially helpful in my case, since there are two cardholders using the account, and we sometimes get out of sync with the budget.
  • I also put the payment due date on my calendar with a recurring reminder several days in advance. Missing the payment date by even one day means paying interest on your outstanding balance. Ouch. My ring-tone reminder is a bugle!
  • Save for big purchases. I will put a large purchase on my card only after I've already put the money aside. Then, I pay it off in full before the due date.

Finding a card that will work for you takes some shopping around. The combinations of annual fees, interest rates, and rewards available can be dizzying — as can be the fine print in the terms and conditions. Focus on getting rewards you can actually use, staying on budget and keeping an eye on your payment due date, and a credit card really can be a power tool. 

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