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Best Practices for Using a Credit Card

By adequately managing a credit card, you can earn rewards and build your credit score while making regular purchases.


GET THE RIGHT CARD
The first step to best using a credit card is to get the right one. That means doing your research. It would help if you considered your spending habits and priorities regarding rewards. Are you an avid traveler who wants to earn miles? Or maybe you’d instead get cash back. It’s wise to avoid cards that charge annual fees or have incredibly high-interest rates if possible.

Once you’ve decided on your priorities, search for cards that will work with your current situation. You should only apply for a card once you feel fully confident that this card will suit your needs and give you the best deal. You should also be sure that you will qualify for it—if your credit score is too low, the company won’t approve your application. Never apply for a card if you’re uncertain whether you can make payments. Multiple applications in a short period and rejections can negatively impact your credit score.


PAY YOUR BALANCE OFF IN FULL & ON TIME
The biggest thing you can do with your card to build your credit score and protect your finances is to pay off what you owe on time. You don’t want to carry over unpaid balances or consistently make late payments because these actions will negatively impact your score and cause you to slip into a situation where you cannot pay off your debt. Paying your balance off on time monthly will boost your score and keep you from paying interest. If you’ve found yourself falling behind, that’s okay. Make a plan to start paying off what you owe and get on top of your monthly payments.


DON’T BORROW TOO MUCH AT ONCE
You’ll need to keep an eye on how much you’re borrowing. You’ll be given a credit limit when you’re approved for a credit card. This is the maximum amount the credit card company will let you borrow once. If you constantly exceed that limit, creditors can view you as a high-risk borrower. The percentage you use of available credit is your credit utilization ratio. The rule is to keep your ratio under 30%; going any higher than this can damage your score. If it isn’t always possible to stay below that number, do your best to pay your balance down as soon as possible to make it less likely that the higher amount will be reported to credit monitoring agencies.


USE YOUR CARD
With that in mind, don’t be afraid to use your credit card. While simply having a card can positively impact your credit score, it will be much more helpful if you use it. A credit card offers revolving credit. When you take out a loan, you slowly pay off the borrowed amount plus interest. With a credit card, as soon as you pay off your borrowed amount, you can borrow it again. Consistent use builds your credit history and shows potential lenders that you can repay money responsibly.


DIVERSIFY
Finally, while an adequately managed credit card can boost your credit score, it will be even better if it isn’t alone. That means that auto loans, a mortgage, and other kinds of loans can also positively impact your score. Within reason, the more borrowing history that you have, the better. Of course, you also want that history filled with accounts where you made steady payments and eventually paid them off. Building your credit score requires balancing multiple credit types where you consistently make payments without overwhelming yourself or opening too many accounts simultaneously.

Holiday Closure: All DoverPhila locations will be closed Saturday, May 25, and Monday, May 27, for Memorial Day.

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