4 Credit Card Rules to Live By

by Maurie Backman | Updated July 21, 2021 - First published on March 27, 2021

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A table of four paying the bill with a credit card at a restaurant.

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These rules help you make the most of your credit cards -- and avoid hurting your finances.

Using credit cards to pay for purchases can work to your advantage. When you swipe your credit cards, you rack up rewards for things you planned to buy anyway. It's an easy way to score free cash back, air miles, and other perks. But if you maintain credit card accounts, it pays to manage them closely. Here are a few rules to stick to.

1. Never charge more than you can afford to pay off when your bill is due

Credit card issuers make money by charging you interest on the balances you carry. But the more interest you pay, the more money you throw out. As a general rule, never charge an expense your paycheck can't cover by the time your bill comes due. You may occasionally need to stray from this rule if emergency expenses pop up, but for regular charges, avoid a balance you can't pay off right away.

2. Don't spend just to snag sign-up bonuses

These days, many credit cards offer sign-up bonuses that give you money back when you charge a minimum amount shortly after opening your card. You may, for example, get an offer of $500 cash back for spending $3,000 on your new card within your first three months. Sign-up bonuses are a great way to score extra money, but only if you already planned to make the purchases that get you to that minimum amount. In other words, if you'd normally spend $600 a month on your credit card, but you push yourself to spend $400 more a month for three months to get to $3,000 and snag that bonus, you don't get a free $500 -- you lose $700 because you spent an extra $1,200 needlessly.

3. Don't let reward points expire

Credit card rewards are a nice perk -- but only when you use them. If you have a card with reward points that expire, pay attention to those expiration dates so you don't give up points you've earned. You may even want to keep a list of ways to use your points. For example, if you have a credit card that gives you money to use at a specific retailer by a certain date, maintain a list of items you may need from that store, whether that includes a new outfit for work, or essentials like underwear and socks. That way, you're more likely to use your rewards on time.

4. Don't cancel old cards unless there's reason to

If you have a credit card you never use taking up space in your wallet, you may be tempted to cancel it. But unless there's a specific reason for doing so -- say, it charges an annual fee you don't get anything in return for -- it pays to keep it. The longer you hold on to the same credit card, the more it helps your credit score, since length of credit history is one of the factors in that calculation. Plus, keeping an old card can leave you with a higher total spending limit across your various accounts, and that, too, can help your credit score by keeping your credit utilization ratio low.

Credit cards are an extremely useful financial tool -- if you use them carefully. Stick to these rules, and you can make the most of yours.

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