Credit Cards

5 Rules For Using Credit Cards And Not Getting Into Debt

how to use credit cardsIn principle, a credit card is really simple to use.  You simply make purchases and pay your credit card bill each month, and that’s all there is to it. However, it’s amazing just how many people end up in debt because they fail understand the basic rules for using a credit card. If you want to avoid a similar situation, here are the 5 most important rules for using a credit card responsibly:

Rule #1 – Pay your bill on time

This sounds obvious, but many people forget to pay their bill or think it’ll be ok to pay it late. However, a delay of even one day can result in you being charged a fee or penalty, and the late payment may also be marked down in your credit file. Do this too many times and you could find future credit card applications are rejected. Also, you must never miss a credit card payment, as this will incur an even greater penalty and a blacker mark on your credit file than paying late.

Rule #2 – Pay your bill in full and not just the minimum monthly requirement

On your monthly credit card bill, both your full balance and a minimum payment requirement will be listed. Many people think they can save money by only paying the minimum, but what happens when you do this is that the rest of the balance is carried over to next month and interest is added on top. If you can only afford the minimum monthly requirement, it means you are spending more on your credit card than your income can support.

Rule #3 – Only spend what you can afford to pay off

This is another basic rule, but one that new credit users often fail to abide by. The excitement of getting a new credit card can result in reckless spending, but you must make sure you have the money to pay your bill at some point.

Rule #4 – Read the small print to avoid unnecessary charges

In the terms and conditions of your credit card, the fees and penalties you will be charged for things like withdrawing cash using your credit card or spending abroad will be listed. Read these through thoroughly so you know what transactions to avoid.

Rule #5 – Check your statement through every month

Reading your statement through every month helps to prevent credit card fraud, as it enables you to spot when someone has been using your card details or your identity to charge things to your credit card. If you throw your statement away each month without reading it, it could be months before you find out that you’ve been a victim of credit card fraud.

Editor’s Note: These are easy to follow rules, but so important when you are using a credit card.  I use my American Express card every month for all of my purchases and don’t pay a penny in interest.  I also earn rewards.  If you do it right, you can have your credit card pay you.


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36 Comments

  1. July 23, 2013 at 6:07 am — Reply

    Solid tips. A credit card can be great if used properly. It can be devastating otherwise.

    • July 27, 2013 at 9:27 am — Reply

      I have been on both sides of the table. I like the rewards when it is used properly.

  2. July 23, 2013 at 7:14 am — Reply

    It’s definitely important to pay your card off in full each month, or at least make every attempt to pay it off in full. If you do that you will avoid your account balance building and building. Great tips!

    • July 27, 2013 at 9:27 am — Reply

      Yeah, you also don’t have to worry about the APR because when paid off in full, that number is mute.

  3. July 23, 2013 at 7:27 am — Reply

    I just had a late fee this month. I don’t like to automate payments, because they can be difficult to change later. But for some reason, I put on my calendar that the due date was July 12 instead of July 2. Oops.

    • July 27, 2013 at 9:29 am — Reply

      That always hurts. If you haven’t had a late payment before, sometimes you can call and they will wave it.

  4. July 23, 2013 at 7:35 am — Reply

    I have been contemplating getting ride of my credit card all together. I really don’t need it, but I hang onto it for the reward dollars and as a way of kicking a large bill out to the next month (so I can earn the interest for the month on the cash sitting in the bank). One of these days I am going to get bit as these credit card companies are snakes. I keep it to one credit card which simplifies things greatly.

    • July 27, 2013 at 9:32 am — Reply

      I only use my credit card. The security is much greater than a debit card and you can earn some good rewards. I also think credit card companies are snakes, but how much are you earning in the bank where you could wait a month to pay your credit card?

  5. July 23, 2013 at 9:28 am — Reply

    I had 3 things in my house and car break 2 weeks ago and all 3 bills ended up on my Visa.

    I have been working so hard at debt repayment that I let my emergency fund trickle away and now I am stuck with over $800 on my credit card and no way to pay it. Debt is very frustrating.

    • July 27, 2013 at 9:32 am — Reply

      Sorry to hear that Jane. I know what you mean. You just have to bear down and get it paid off. There is nothing fun about it, but you feel much better when you are done.

  6. July 23, 2013 at 9:44 am — Reply

    These are all great tips! Credit cards do not have to be a negative thing in your life. Use them to your advantage!

    • July 27, 2013 at 9:33 am — Reply

      That is what I do.

  7. July 23, 2013 at 11:52 am — Reply

    Good tips, I think #3 is likely the most important! If you don’t live within your means, it doesn’t matter whether its CC debt or not, you’ll be in debt. I usually check my CC about once a week as well, just to make sure I’m budgeting correctly, and can adjust my spending habits if need be before my bill is due at the end of the month and I realize I don’t have enough to pay it off in full.

    • July 27, 2013 at 9:34 am — Reply

      I budget purely off my credit card because that is what I use for all of my payments, less just a few.

  8. Justin @ The Family Finances
    July 23, 2013 at 12:56 pm — Reply

    Credit cards are definitely a two-edged sword. They are absolutely awesome financial tools when used properly. They make for safe, convenient payment, they reward you for making purchases, and there are a lot of other perks like extended warranties and free travel insurance. However, the minute you start carrying a balance and charging more than you can afford to pay off, all those benefits go out the window.

    • July 27, 2013 at 9:37 am — Reply

      I agree Justin. I used to use them the wrong way and now that I see the power of them, I only use them.

  9. July 23, 2013 at 1:41 pm — Reply

    great tips…especially #3. It’s as simple as that. I mentioned once to someone who was in credit card debt who looked at me perplexed. If you can’t afford to pay it off, don’t buy it! End of story. Unless it was for food and you’d starve without it or some other basic life necessity.

    • July 27, 2013 at 9:38 am — Reply

      So true. I know only use it for things that I would normally buy each month. If I can’t afford it, then the card doesn’t come out.

  10. July 23, 2013 at 2:54 pm — Reply

    All great tips. I would also add that if a month comes when you can’t pay your bill in full, it might be wise to go back to cash until things are under control again.

    • July 27, 2013 at 9:39 am — Reply

      Great point Laurie.

  11. July 23, 2013 at 3:52 pm — Reply

    Credit cards can be wonderful tools if you use them correctly, but if you can’t pay them off every month, I do think it’s better to use cash.

    • July 27, 2013 at 9:39 am — Reply

      Cash or Debit depending on the method you prefer.

  12. Jake @ Common Cents Wealth
    July 23, 2013 at 5:59 pm — Reply

    Great advice. These sound so simple, but it’s amazing how many people don’t follow them. Normally I pay off my credit card more than once a month just to make sure that I know I won’t have to pay any interest. I don’t think I’ve ever paid a penny of interest due to credit cards and I hope I never have to.

    • July 27, 2013 at 9:40 am — Reply

      That is great to hear Jake. The interest charges can be deadly. I can attest to that.

  13. July 23, 2013 at 8:26 pm — Reply

    Be careful with credit cards. if you are not prudent in managing spending, you will be deep in debt. The key is to settle your bills on time to avoid excessive interest charges.

    • July 27, 2013 at 9:41 am — Reply

      You are correct. You have to have the correct spending mentality before you use credit cards for purchases.

  14. July 23, 2013 at 10:55 pm — Reply

    I have a direct debit for the full payment, easy, automated, you just have to pay attention to what you spend but no late fees for forgetting to send a cheque.

    • July 27, 2013 at 9:42 am — Reply

      I don’t use checks for anything unless I have to.

  15. Derek | MoneyAhoy.com - Money Saving, Making Money, and Investment Ideas
    July 24, 2013 at 1:52 pm — Reply

    Also, if you make a mistake and forget to pay on-time for whatever reason, call them up to negotiate. They almost always will waive the late fee and interest if it is the first time in a number of years.

    • July 27, 2013 at 9:42 am — Reply

      You are correct Derek. The new Discover it card gives you a waive on the late payment if it is your first one.

  16. July 26, 2013 at 12:05 am — Reply

    Paying on time is one that is so important yet easy to make a mistake on. I want to review my bill before paying it, so this one takes effort. But, it’s important.

    • July 27, 2013 at 9:43 am — Reply

      I always look over my bill before I pay it because you never want to have someone using your card without knowing it.

  17. July 27, 2013 at 6:41 pm — Reply

    I wanted to add one more tip that is related to this, but from a different angle. These are five very good rules, that when followed, will keep you out of debt, but why else should a person have credit cards? Well a main reason is to “build credit”. So make sure you use your credit cards to build credit. After 8-12 months of using your cards and paying the balance off in full, if the creditors don’t at that time raise your limit, well you better request they do, because you should be rewarded for having that type of perfect payment history. Once they raise your limit, you just improved your credit score instantly. Your score may not immediately go up that same day, but within the next 90 days, you will see it go up.

    Getting your limit raised and keeping your balance at zero, allows you to build credit, it is that easy. When you build credit, your score goes up.

    • July 29, 2013 at 11:58 am — Reply

      Great tip Paul. I agree with this. This is the reason why I got a credit card at first. I needed to build some credit.

  18. Tammy - Loans and Lifestyle
    September 19, 2013 at 6:19 am — Reply

    These are great tips on staying ahead of your credit card debt. I think the most important thing is to regularly check your statement and make sure there are no interest fees accumulating. My parents generously used credit cards but never gathers a single penny of debt. I personally don’t own a credit card because it simply encourages one to spend more than they have in the bank. I’m more of a debit card person, but these tips are super helpful.

    • September 19, 2013 at 9:13 am — Reply

      Thank you and great tips yourself. I used to use a debit card exclusively, but then with the rise of identity theft, I switched to credit cards. They don’t push me to spend more, as I treat it just like a debit card.

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