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How To Use Credit Cards - The Right Way


When used responsibly, credit cards can be a powerful tool. They're convenient, secure, offer rewards, and help us build credit. However, if not used responsibly, they can lead to debt, stress, and a negative impact on your mental and financial health. In this article, we will discuss how to use credit cards—the right way.

Understanding What a Credit Card Is

I get it... you're probably thinking, "Of course, I know what a credit card is; who doesn't?" And yes, I know it seems obvious that it's a card you can buy things with, but it's also more. It's a tool that helps us build credit and can actually pay YOU for using it! Yes, most credit cards have reward points that can directly convert into cash. You can use these points to buy gift cards, apply them toward your statement balance, or even book vacations. These reward points are how you use credit cards to your benefit, instead of the other way around, and how you can essentially be paid to use your credit cards.

The banks that offer these credit cards don't make money from responsible card users like you or me. They make money from those who overspend, don't pay off their balances, and incur interest charges month after month. Our job is to make sure we don't pay a dime in interest but collect those sweet reward points.

How Do Reward Points Work?

Reward points are a type of currency created by whichever bank is issuing your card. For example, Chase has Ultimate Rewards points, AMEX has Membership Rewards, and Citi has Citi ThankYou points.

These points are earned for every dollar you spend using a credit card. For example, if you were to sign up for the Chase Freedom Unlimited, you would earn 3% cashback on drugstore purchases and restaurants, plus 1.5% back on everything else.

Now, imagine you're dining out at the Cheesecake Factory, and the bill comes to $100. If you were to use your debit card, you wouldn't earn any reward points. You would simply pay for your meal and go about your day as usual. However, if you used your Chase Freedom Unlimited to pay for the meal, you would get $3 back (3% of the $100 bill) in the form of Chase Ultimate Rewards points. Now, I know $3 doesn't sound like much, but it's better than nothing, right?

Now, imagine you get 1.5% back on all purchases. Between groceries, utilities, shopping, and extra activities—let's say you spend $2,000 per month on your cards. You would earn $30 back in rewards each month ($360 per year) for doing absolutely nothing extra, and this isn't even including a sign-up bonus. Those could be worth $1,000 or more! The key here is not to spend more than you normally would anyway. You don't want to spend more money just because you are earning rewards; instead, stick to your usual spending habits and earn some extra money on the side.

Paying Your Balance in Full

Now, let's dive deeper into a crucial aspect of using credit cards the right way—paying your balance in full each month. This is where many people struggle, viewing credit cards as 'free money' or overspending due to the available credit line. I don't think I need to say this, but I will: credit cards are NOT free money.

Imagine your credit card bill as a ticking time bomb. If you don't defuse it by paying the entire amount before the due date, you'll get hit with interest charges that can quickly spiral out of control. Interest charges will quickly offset any advantages you get from earning reward points, and the credit card will end up costing you money.

To avoid this financial pitfall, make it a habit to pay off your credit card balance every month. This way, you won't be throwing your hard-earned money away on interest payments. If you find yourself unable to pay the full balance one month, at the very least, aim to pay more than the minimum payment. Doing so will help reduce the interest charges that accrue.

There are many personal cards out there that offer a 0% APR in the first 12-15 months, and those are the cards I'd recommend starting with if you haven't gotten them yet. These cards usually offer a decent sign-up bonus and no annual fees. I'll list a few below and their benefits:

Chase Freedom Unlimited

  • 5% back at gas stations and grocery stores for the first year
  • 3% back on dining and drugstore purchases
  • 1.5% back on your other purchases
  • $200 sign-up bonus after spending $500 in the first 3 months
  • 0% APR for the first 15 months

American Express EveryDay

  • 2X points at U.S. supermarkets, on up to $6K per year in purchases
  • 1X points on your other purchases
  • 10,000 Membership Rewards sign-up bonus
  • 0% APR for the first 15 months

Citi Double Cash

  • 1% back on all purchases + an additional 1% back when you pay it off (2% total)
  • 0% APR for the first 18 months

Regularly Monitor Your Credit Card Statements

Now that you have your credit cards and understand how they work, you'll need to stay vigilant about tracking your credit card transactions. This is another critical aspect of responsible credit card usage. You should make it a habit to regularly review your credit card purchases to see where you can better optimize your finances and ensure there aren't any fraudulent charges.

By closely monitoring your statements, you can quickly identify any unfamiliar or unauthorized charges. If you see any, you can easily dispute the charge and be reimbursed. This is the best benefit of using a credit card. When using a debit card, being a victim of fraud can hurt significantly worse because the money being "scammed" is coming directly from your checking or savings account. However, if you use a credit card and someone happens to get the card number and use it, you are protected by the banks and can quickly have them fix the issue by just logging into the app and disputing the charges. I have heard of many people having issues getting their money back when they were scammed and weren't using credit cards. Unfortunately, when it's the bank's money at risk, they move a lot quicker than when it's our money.

Regularly reviewing your statements also serves another purpose: it helps you stay on top of your spending. By keeping a close eye on where your money is going, you can make more informed decisions about your finances and identify areas where you might need to cut back or adjust your budget.


To sum it up, credit cards can be valuable financial tools when used wisely. By understanding your credit card terms, paying your balance in full, and consistently monitoring your statements, you can use the cards to your advantage and not the other way around. With responsible credit card usage, you can maintain a sound financial life, earn rewards, purchase securely, and make the most of what credit cards have to offer.

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