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.