Published in: Credit Cards | Dec. 17, 2018

This Could Be the Best Way to Use Your Credit Card

We are committed to full transparency as part of our mission to make the world smarter, happier, & richer. You should know that offers on The Ascent may be from our partners - it's how we make money. That transparency to you is core to our editorial integrity, which isn’t influenced by compensation.

Follow this simple set of guidelines to make the most of your cards.

Group of young men and women laughing at table holding credit cards

Image source: Getty Images

Credit cards can be either a valuable tool giving you powerful benefits or a gateway to a nightmare of debt. It all depends on how you use the credit cards you have. If you want to avoid the problems that millions of credit card users face, you have to use your credit card in the best way you can. Follow these three simple rules, and you'll be on your way to making the most of your credit cards.

1. Never carry a balance

Credit cards offer the same benefits to their cardholders regardless of whether they carry a balance. Yet when it comes to the card companies making money, customers who carry balances are far more profitable than those who don't. That's because if you have a balance, you'll have to pay hefty finance charges that are the chief moneymaker for the financial institutions that issue those cards.

That's not to say that card companies can't make money off you if you don't carry a balance. Collecting transaction-based fees from merchants is also profitable. But to avoid high interest payments that will more than offset any benefits from using typical credit cards, it's essential not to carry a balance.

2. Get the biggest rewards you can find

Cardholders can pick the right rewards credit card and choose from a wide variety of rewards for using them. Some cards offer a percentage of purchases as cash back, while others use airline miles or other point-based systems as the medium for their rewards programs.

Navigating the various programs that different cards offer can be tricky, but the smartest strategy involves the following:

  • Have an all-purpose credit card that offers consistent rewards for all of your spending.
  • Have specialty credit cards that consistently offer higher rewards for specific categories that match up with your spending patterns.
  • Take advantage of periodic short-term incentive programs that offer temporarily higher rewards in certain spending categories.

By putting together the optimal arsenal of credit cards, you can make the most of the rewards opportunities that cards can give you.

3. Don't make dumb mistakes

Credit card companies are ready to pounce if you slip up with your cards. Something as simple as missing a payment due date can have a host of negative impacts, ranging from late payment fees to the start of interest charges on your entire balance. Similar fees can apply if you try to spend above your credit limit or if a check you submit for payment gets returned.

The costs of simple mistakes can wipe out all the work you do elsewhere to maximize card rewards and make the most of what your credit cards have to offer. Be diligent about making full payments on time and in whatever manner will ensure that none of those much-hated card fees applies.

Make credit cards the best tool you have

Everyone has to spend money, and used correctly, credit cards can be one of the smartest ways you have to pay for the things you need. By using your credit card in the best way possible, you'll take full advantage of everything credit cards have to offer without suffering any of the pitfalls that so many cardholders end up facing.

Our #1 cash back pick has a surprise bonus

This may be the perfect cash back card! That's because it packs in $1,148 of value. Cardholders can earn up to 5% cash back, double rewards in the first year, and avoid interest well into 2020. With such a deep bench of perks you'll wonder how this card packs in a $0 annual fee. Best yet, you can apply and get a decision in two minutes. Learn more with our in-depth review.

Find the right card for you

Cash Back & Rewards