How to Use a Credit Card Wisely & Maximize Benefits

Introduction

They say cash is king. But for some purchases, using a credit card may be your best bet. Not only can responsible credit card use help you build a good credit score, but it can also provide you with a variety of features and benefits that can add a little more oomph to your finances.

Here are some of the purchases you should consider making with a credit card.

Travel Expenses: Why You Should Use Your Credit Card

Whether you’re looking to book a flight, fill up your gas tank, or make purchases along the way, there are many reasons to consider using a credit card while traveling. Not only do credit cards provide a level of security that debit cards or cash don’t, but they’re more convenient to carry than a wad of bills and they’re easily replaceable if lost.

Built-in travel protection

Some travel cards offer travel protection insurance, like cancellation and interruption coverage in case your plans are disrupted. Other common travel perks include lost luggage reimbursement and emergency assistance service.

Just know that these benefits may have specific requirements and usually only kick in when you paid with that card.

Fraud protection

Many cards offer built-in fraud protection, which guards against unauthorized transactions resulting from fraudulent use of your credit card. This can give you some added peace of mind if something happens to your card while you travel in an unfamiliar area.

Travel rewards

Credit cards often come with rewards for eligible purchases — and this is particularly true for travel credit cards. Rewards may range from earning points when you book a flight, hotel, or rental car to cash back rewards on the meals you buy, to accruing miles which can be redeemed for more air travel.

Many travel credit cards also offer travel benefits such as travel insurance, discounts, upgrades, and more. And some may offer introductory bonuses to make them even more attractive.

Electronics and Appliances: Get Points and Additional Benefits

Have your eye on the latest gadget or need a new appliance? Using a credit card to make that purchase can earn you a decent amount of points or cash back rewards, depending on the card.

Especially if it’s a big-ticket item. Some credit cards may even provide you with price protection, insurance, extended warranties, or extra security to make that potentially pricey purchase more comfortable.

Mobile Phone Bills: The Benefits of Paying With a Credit Card

Using a credit card to pay your mobile phone bill can also provide some additional benefits. If your credit card offers rewards points or cash back for paying such eligible monthly expenses, then you can maximize that by strategically choosing which bills to pay with that card. Some credit cards may even come with additional cellphone-related perks such as device protection.

As with any other purchase, before using a credit card to pay your mobile phone bill, make sure that you have a plan to pay it off. If you let the balance sit and it accrues interest, you will end up paying more than what the bill was in the first place. But if you pay it off within your grace period, you’ve essentially given yourself a few more weeks to pay your phone bill.

Groceries: Consistently Earn Rewards

By choosing plastic over paper when it comes to paying for your groceries (as in credit cards over dollar bills), you can quickly bag rewards every time you go to the store. This is because many credit cards offer cash back, points, or other types of rewards on specific spend categories — and groceries are commonly one of those categories. Considering food is something you likely have to regularly buy (unless you grow it all yourself), you might as well get some bonus rewards when checking out.

Dining Out: Earn Cash Back Rewards and Points

If you’re a foodie, using a credit card when you dine out can add some tasty rewards to the menu since some cards offer cash back rewards or points on dining, which can often be redeemed for merchandise, gift cards, or a variety of other things. But, before asking for the check, be aware that some restaurants may charge you an extra fee for using a credit card. 

Online Shopping: Enjoy Convenience and Earn Rewards

Nowadays, you can buy just about anything from your phone, tablet, or computer. So why not add some rewards to the convenience of being able to buy whatever you want, whenever you want to, from essentially anywhere?

Just like the other purchases mentioned in this list, you may be able to earn cash back rewards or points on eligible purchases made online. Key word: eligible. Be aware of the specifics of your card before assuming that you’ll earn rewards on every purchase you make.

Using a credit card for online purchases is also generally a safer method of payment than using a debit card. Many credit cards offer safeguards such as zero fraud liability which protect you against unauthorized charges if your card is ever lost or stolen.

Rental Cars: Get Rental Car Insurance and Other Perks

Renting a car with a credit card isn’t just more convenient than using debit or cash, it can also offer added protection and save you money.

Many cards offer some form of car rental insurance. This is often secondary coverage, which kicks in after your own personal policy has paid what they’re going to pay.

Other cards offer primary coverage, which means you can go through your credit card issuer instead of paying for extra coverage or using your own car insurance.

Before accepting or declining anything at the car rental counter, be sure you know what kind of coverage your card includes.

There’s also another way a credit card can help you save money when you rent a car. Some cards, like travel-oriented cards, American Express cards or Visa Signature cards, may also offer rental discounts as a perk.

Streaming Services: Build Credit and Earn Points with Small, Recurring Monthly Expenses

A monthly subscription can help you build credit, if you pay for it with a credit card and pay your bill on time, every time.

Payment history is the most important factor when it comes to your credit score, so a relatively small, recurring payment like a streaming service subscription can be a good way to establish or re-establish a good track record.

And if you use a rewards card, you’ll get to take advantage of that perk while building your credit, too.

Everyday Credit Card Tips for Smarter Spending

Here are a few additional things that can help if you want to better take advantage of your credit card and its benefits.

Earn rewards

If you don’t already use one, consider a rewards card so you can earn cash back rewards, points or miles on your spending.

If you want to maximize your rewards, you may want to review your transaction history and look into cards that reward categories you spend the most money in. You might even consider having more than one rewards card to cover different categories.

Track and limit your spending

Using a budget is a great financial habit and will help you prevent overspending. Perks and rewards don’t mean as much if you end up frequently paying interest on your card’s balance.

Set up AutoPay and avoid late fees

Making on-time payments is essential to having a good credit score and avoiding late fees, so you want to make that as easy as possible.

If your card offers AutoPay, it’s one of the best ways to automate your financial life and make it easier. Just set it up and you don’t have to worry about forgetting to make a payment on time.

Protect yourself from fraud

There are a few precautions you’ll want to take to avoid fraud when using your credit card.

Regularly monitoring your accounts for suspicious activity, using strong passwords and being cautious of scams are all strong ways to prevent credit card fraud from impacting you.

Times You Should Avoid Paying With a Credit Card

Credit cards might be convenient, but there are a few situations where using one might not make sense.

When a merchant charges credit card fees

If a merchant charges extra for using a credit card, it might not be worth it. Even if you use a rewards card, the fee may cancel out your rewards.

When the purchase raises your credit utilization above 30%

One of biggest factors in calculating your credit score is your credit utilization ratio, which measures how much of your total revolving credit you’re using at any given time.

Using too much of your available credit at once can negatively impact your credit score, so experts suggest using less than 30% of a card’s credit line.

When a purchase is too expensive to pay off before accruing interest       

It’s a good idea to think twice before charging more to your card than you can easily pay off. If you pay less than your card’s statement balance in a billing cycle, the remaining balance will be subject to interest.

There may be occasions where you just have to charge something and pay it off over time — like if you don’t have enough emergency savings to cover something. But it’s best to make this the exception rather than the rule. Managing your debt is important for your short-term finances and your long-term credit health.

FAQs

What are the key principles of responsible credit card usage?

These are some of top habits to keep in mind if you want to use credit cards optimally.

• Always make at least the minimum payment on time, every time — but ideally, pay your statement balance in full

• Only spend what you can afford to pay off

• Use less than 30% of your available credit

• Monitor your account and credit reports for suspicious activity regularly

• Contact your issuer as soon as possible if your card is lost or stolen

How can credit cards help build credit?

Simply using credit cards strategically can help you build up your credit score through three factors: payment history, credit utilization and credit mix.

Making consistent, on-time payments is something lenders like to see. So it comes as no surprise that your payment history is the hugely important to your credit score.

Keeping your credit utilization low is good, because it shows that you aren’t overextending yourself. Using 30% or less of your available credit is considered ideal.

And finally, your credit mix represents your various credit cards, loans and other credit types. It demonstrates that you can manage different kinds of credit effectively.

What purchases can I make with a credit card?

Groceries, gas, subscriptions, travel — you can use a credit card for all sorts of purchases if the merchant accepts it as a form of payment.

Just be sure to only charge what you can afford and be mindful of any added convenience fees. These fees are more common when paying certain bills like taxes, home service providers and some loans.

What additional credit card benefits should you be aware of when making purchases?

Some of the most well-known credit card perks are rewards, extended warranties, travel insurance and fraud protection, but those are just the tip of the iceberg. Here are some other benefits worth looking out for.

• Credit score monitoring

• Early access to concert and event tickets

• Concierge services for booking restaurants, events and travel

• Subscription credits for streaming services

• Discounts at local venues, events and attractions

• Additional rewards, like Amex Offers

Bottom Line

When it comes to making purchases — big or small — using a credit card can provide plenty of extra perks. These can range from rewards programs that give you little extra something to security features that give you peace of mind.

However, remember that with credit card use comes the responsibility of paying off your debt. Always have a plan to pay off your bill. That will keep your finances in solid shape, help you save money by avoiding interest, and even potentially boost your credit score.

Looking to add a credit card to your wallet for essential purchases and more? See if you pre-qualify for a Credit One Bank card today, with no impact to your credit score.