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When to use your credit card

Experts give advice about the best and worst times to use credit


There are no set rules about when to use your credit card, but there are times when it’s more beneficial to swipe and times when it’s not. Find out what the experts have to say and see where you stand.

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What kind of credit card user are you?

Do you find yourself whipping out your card for every single purchase you make?

Or, are you more of a conservative cardholder who only pulls out the plastic for big-ticket items?

Whichever kind of spender you are, you have your reasons.

There are no set rules about when to use a credit card, but you might rethink your habits after you read what the experts say about the right – and wrong – times to use that card.

When to use your credit card

If you’re concerned about security

Using your credit card for online purchases and for traveling expenses – such as booking tickets and making hotel reservations – is a good idea, according to Janet Patterson, vice president of marketing communications for Highway Title Loans and feature editor of its lending blog.

If you have any issues regarding purchases, you’ll have your credit issuer to help you fight them, she said.

In addition, using your credit card can provide better protection against fraud – you just report any fraudulent charges to your card issuer and while it investigates the dispute, you’re not responsible for the charge.

Sean Fox, co-president of Freedom Debt Relief, pointed out that using your card is also a good idea when you want to protect access to your bank account.

Someone who obtains your debit card number has direct access to your bank account and can empty it in minutes, he said, and you won’t get that money back until your bank investigates.

And depending on the issuer, you could be responsible for up to $500 of charges you didn’t make.

Some banks will even hold you fully responsible if the card is used fraudulently for PIN-based transactions, Fox warned.

“While banks and ATM operators have improved efforts to track fraud and eliminate skimming, smaller, ‘off-brand’ ATMs have become greater targets,” Fox said. “But using a credit card at an ATM offers protection against that kind of fraud.”

See related: Credit card scams in the time of coronavirus

If you want to reap rewards

Credit card rewards are like free money – and they are a compelling reason to use your card.

That said, if you can’t pay your credit card off in full each month, the amount of interest you will pay each month for an outstanding balance could outweigh any benefit you receive from a rewards program, said Timothy Weidman, a retired certified financial planner and college professor who taught personal finance courses.

But, he said, those rewards can be mighty useful if you value what’s available and actually use them before they expire.

Weidman said he’s used a General Motors Mastercard for nearly 25 years as one of his two primary credit cards.

By using that card, he generates “earnings” that can be redeemed on the purchase or lease of a new GM vehicle. And because the customer negotiates the price of the car before telling the dealer that he or she has earnings to redeem, this is a true discount.

In addition, those earnings can be combined with many of the other discounts that GM offers, such as GM owner loyalty bonus cash.

Since 1999, Weidman has redeemed more than $6,000 in earnings when purchasing new Chevrolets.

And, since he rarely carried a balance on his GM card, he actually saved $6,000 – and the card comes with no annual fees.

See related: How to maximize credit card rewards

If you can pay your balance in full

Joe Brusca, co-owner of Build Assets Online, recommends using a credit card for everything, period.

“With all of the great rewards and cash back that credit card companies give, you’re basically giving up free money by not using one,” he said.

But he stressed that if you use your card this way, you need to make sure that you’re disciplined to never charge more than you can afford to pay off each month.

You have to come to grips with the fact that it’s real money that you’re spending and not just fake bits and bytes, he cautioned.

“Just don’t bite off more than you can chew and you’ll always be on the winning side of the credit card companies,” Brusca recommended.

See related: How to pay off credit card debt – 3 best strategies

To help build credit

A credit card can be a valuable tool for building credit if you use it the right way, said Patterson.

Responsible use of a credit card shows that you have the ability to manage and repay debt, which debit card and cash payments do not.

And because your payment history accounts for 35% of your FICO score, keeping that history positive can really boost your credit score.

“Use your card for monthly bills, such as a gym membership or cable and cell phone bills, maintain a good payment history and you’ll be on your way to building your credit,” she said.

See related: Credit building credit cards

For emergencies

Andrew Roderick, CEO of Credit Repair Companies, believes it’s fine to use credit cards for emergencies.

In this case, an emergency is a purchase that you can’t currently afford but know you will be able to pay off within weeks, such as a car or home repair.

“Be smart and use [your credit card] only when absolutely necessary,” he cautioned.

And remember that if you carry a balance on a card that has high interest, which could be the case in an emergency, it can cost you a lot more than you bargained for, so try to pay off that balance as soon as possible.

When not to use your credit card

You’re approaching your credit limit

Ben Reynolds, CEO and founder of Sure Dividend, warned that it’s not a good idea to make spontaneous purchases that will cause you to use all of your available credit limit.

It might be tempting to use all the credit you have available, but this can lower your credit score.

Before you reach for that plastic, remember that your credit utilization ratio – the amount of credit you use compared to your credit card limits – makes up 30% of your credit score under FICO’s formula. And maxing out a credit card can seriously damage your score.

See related: What is a good credit utilization ratio?

You’re buying from a small merchant

Freedom Debt Relief’s Sean Fox said you should not use your credit card if you’re shopping at a small, local store or a farmers’ market.

While many will accept credit cards, they still must pay interchange fees – the fees banks charge merchants for using plastic.

“Paying with plastic sends as much as 3% of the total purchase price to the banks instead of the local merchant, and for people trying to help out community merchants, this might be an important consideration,” Fox said.

See related: Small-business guide to credit card merchant fees

Your card charges a lot of fees

A credit card’s fees can be an important factor in how you use it.

If your card issuer charges a fee for foreign transactions, balance transfers or cash advances, try to use another kind of payment or find another source for cash, she suggested.

Bottom line

The key takeaway here is to use your credit card responsibly – doing that can lead to access to the best credit cards and lowest interest rates, significant savings on mortgages, insurance discounts and more.

Paying on time and in full each month will not only boost your credit score, it will also prevent you from paying interest charges and late fees.

Remember to find a credit card that earns points that are valuable to you or that offers cash back rewards if you prefer. Once you find that card, use it consistently to get the most bang for your buck.

Credit cards can be helpful, powerful financial tools that can really benefit you if you use them the right way.

A good rule of thumb is to use your credit card for safety and convenience, not to finance a lifestyle you really can’t afford.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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