The Best and Worst Ways to Use a Credit Card

You don't want to use your cards the wrong way at a cost to yourself.

If you have credit cards, or are thinking about applying for one, you'll want to make sure you make smart choices when it comes to using them. Cards can either help or hurt your finances, depending on what you do with them. To make sure you don't get yourself in trouble with your credit cards, take a look at the best and worst ways to use them. 

These are the best ways to use credit cards

The best way to use credit cards is to make use of them in such a way that you can earn rewards, build credit, and avoid high interest charges. This means you will need to:

• Pay off your balance each month before interest begins accruing. If you pay off your card in full when your payment is due, you will never have to worry about getting trapped in debt. Cards charge a pretty high interest rate so if you have to pay it, you can easily end up in financial trouble quickly. 
• Pay your bills on time and keep your credit utilization ratio below 30%. These two moves will help ensure your cards help you build credit rather than hurting your credit score. Paying bills on time is essential because your payment history is the most important factor when your score is determined. And keeping a low ratio of credit used versus credit available gives lenders confidence you know how to use your cards responsibly. 
• Choose a rewards credit card that is well matched to your spending. Many cards offer bonus rewards for certain kinds of purchases such as shopping at grocery stores. If you tend to spend more of your money on certain expenditures such as travel, then you'd want to look for a card that gives you extra rewards for that kind of purchase. 

If you use your cards in this way, you will likely end up better off financially because you have them. 

And these are the worst ways 

There are also some bad ways to use your cards. Specifically, the worst ways include using credit cards to finance a lifestyle you cannot afford and being irresponsible about how much you charge and how much you pay.

Far too many people end up using their credit cards to buy luxuries or pay for non-necessities such as vacations. Unfortunately, this can create a really difficult situation. 

As your balance grows, your interest costs keep going up since you will be paying interest on a larger principal balance. The minimum payment is typically pretty low, but most of the money will go toward interest since credit card interest is so high. All of your purchases will end up costing much more, you'll be tying up an ever-increasing amount of money in minimum payments, and you'll have a hard time getting ahead.  

You absolutely don't want to make this mistake, nor do you want to use cards and forget to pay them or max out your credit cards, as doing either will hurt your credit score. By avoiding these card behaviors, you can make sure you benefit from becoming a cardholder.