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How to Use Credit Cards Most Effectively

How to Use Credit Cards Most Effectively

*Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Nov 29, 2018. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

Credit cards are a very common form of payment in the U.S., with Americans having an average of 3.1 credit cards each, according to a study by Experian. By using a credit card, you can build credit, simplify bill pay and benefit from exclusive rewards, among numerous other perks. However, if you don’t use your card responsibly and choose to overspend, you can incur high interest charges and fall into debt. A study by MagnifyMoney, another LendingTree company, found that Americans have paid banks nearly $104 billion in credit card interest and fees in 2018 so far. This is a high amount that can be avoided if Americans pay their credit card bills on time and in full every month.

In October’s CompareCards Credit Card Confidence Index, we found that while 42% of Americans surveyed expressed they were very confident they could pay their credit card bill in full in that month, nearly a quarter (23%) had not paid their credit cards’ monthly statement balance in full in any of the past six months. This shows that while consumers may be more confident of their ability to pay, they don’t always follow through.

If you’re new to credit, it’s key to learn how to use your new card most effectively right away so you can begin to build a good credit score. More experienced credit card users can always learn new ways to maximize the value of their credit cards so they can earn increased rewards while minimizing fees.

In this guide, we’ll provide tips on how you can use your credit card most effectively, regardless if you’re new to credit, have excellent credit, a rewards card or a no-frills card.

Choose the right card for your needs

An important first step before you open a new credit card is to ask yourself two questions: “How will I use this card and what do I want to get from it?” according to CompareCards’ chief industry analyst Matt Schulz. Answering those two questions honestly will help you decide which card is right for you and allow you to make a well-educated choice. You don’t want to apply for a credit card on an impulse and end up with a card that doesn’t suit your spending habits or needs.

Read our complete guide on how to pick the best credit card.

Don’t spend more than 30% of your total credit limit each month

It’s never a good idea to max out your credit card or spend high amounts since that can only hurt your credit score and lead you to fall into debt. The amount of credit you use on your credit card — referred to as “utilization” — is the second most important factor of your credit score, making it key not to overspend. To easily find your utilization rate, add up the total amount you owe on your credit cards and divide that by your total available credit.

For example, if you have two credit cards with limits of $2,000 and $3,000, your total available credit would be $5,000. Then, if you spent $500 on one card and $1,000 on the other, the total amount you owe is $1,500. Divide $1,500 by $5,000 and you get 0.30 or 30%. A utilization rate of 30% is considered ideal and can help positive payment information be sent to the credit bureaus, therefore helping your credit score.

Only charge what you can pay off within the statement cycle

Credit scores aside, keeping spending to a minimum or a needs-not-wants basis is a good practice to follow. This can help you minimize your chances of falling into debt. A good rule of thumb to follow is only charge what you can afford to pay by your bill’s due date.

“Job No. 1 for any credit cardholder is to pay your balance off as soon as you possibly can,” Schulz said. “If you carry a balance month to month, the math starts to work against you in a big hurry.”

A billing cycle — aka statement cycle — is the amount of time you have to pay any balances you accrued on your card. For example, if your billing cycle closes on Sept. 7 and your payment due date is Oct. 3, then you have the 26 days from Sept. 7 to Oct. 3 to pay off your balance. Payments made after your payment due date are subject to interest and fees. Most banks allow you to change your payment due date to a date that works best for your needs, so take advantage of this perk as needed.

Another feature of your billing cycle is a grace period — no less than 21 days — where you won’t be charged interest on any purchases. Once the grace period ends, you will be charged interest on unpaid balances — unless your card has an intro 0% APR for purchases.

Your credit card may allow you to set balance alerts when you use a certain amount of your credit. This can help you stay on top of how much you’re spending so you don’t overspend.

Pay your bill on time — even if you can only afford the minimum payment

Payment history is the most important factor of your credit score, making it an important step for you to practice. Plus, paying on time is key if you want to avoid late fees, penalty APRs and interest charges. Most credit cards allow you to set up autopay so you won’t have to worry about remembering to pay your bill. You can also set up payment reminders.

“Thanks to autopay, there’s no excuse for making late payments anymore,” Schulz said. “That’s a big deal because even just a single late payment can really do damage to your credit score.”

Below, we list the cutoff times for payments to be credited same-day. You can find out more information on when your card payment is considered late with this guide by MagnifyMoney, which is also owned by LendingTree.

Online Phone Mail
American Express 7:59 p.m. MT 7:59 p.m. MT American Express
P.O. Box 650448
Dallas, TX 75265-0448Express mail*:American Express
Attn: Express Mail Remittance Processing
20500 Belshaw Ave.
Carson, CA 90746
Bank of America 11:59 p.m. EST 11:59 p.m. EST Bank of America
P.O. Box 15019
Wilmington, DE 19850-5019Overnight address*:Bank of America
Attn: Payment Processing
900 Samoset Drive
Newark, DE 19713
Barclays 6:59 p.m. EST 6:59 p.m. EST Card Services
P.O. Box 60517
City of Industry, CA  91716-0517Card Services
P.O. Box 13337
Philadelphia, PA  19101-3337Overnight addresses*:

Card Services
Lock Box 60517
2525 Corporate Park, Suite 250
Monterey Park, CA  91754


Card Services
400 White Clay Center Drive
Newark, DE  19711

Capital One 7:59 p.m. EST, Monday-Saturday 7:59 p.m. EST, Monday-Saturday Capital One
Attn: Payment Processing
PO Box 71083
Charlotte, NC 28272-1083Overnight address*:Capital One
Attn: Payment Processing
6125 Lakeview Rd
Suite 800
Charlotte, NC 28269
Chase 11:59 p.m. EST 11:59 p.m. EST Cardmember Services
P.O. Box 6294
Carol Stream, IL 60197-6294
Citibank 11:59 p.m. EST 11:59 p.m. EST Citibank / Choice P.O. BOX 9001037
Louisville KY, 402904-1037Overnight address*:

Citibank Express Payments
6716 Grade Lane Building 9
Suite 910
Louisville, KY 40213

Discover 11:59 p.m. EST; except for payments made on your due date — those must be made by 4:59 p.m. EST 11:59 p.m. EST; except for payments made on your due date — those must be made by 4:59 p.m. EST Discover Financial Services
P.O. Box 6103
Carol Stream, IL 60197-6103
HSBC 12:59 p.m. EST 12:59 p.m. EST HSBC Bank USA, NA
PO Box 4657
Carol Stream, IL
Wells Fargo 11:59 p.m. PST 11:59 p.m. PST Wells Fargo Card Services
P.O. Box 51193
Los Angeles, CA 90051-5493Express mail*:Lockbox Services 51193
Attn: WF Consumer Credit Card
3440 Flair Drive
El Monte, CA 91731

*Overnight or express payments need to be sent with express mail services such as FedEx, UPS and DHL to ensure quick delivery.

It’s even better to pay more than the minimum each month

While you only need to pay your minimum due each billing cycle to avoid late fees and penalty APRs, you will incur interest charges by carrying a balance month-to-month. Not paying each bill in full can lead you to fall into debt. We recommend paying your bills in full each month so you avoid interest charges and the risk of debt.

Keep tabs on your account to get ahead of any fraudulent activity

While credit cards can provide many benefits, they can also pose risks. Your credit card may become subject to fraudulent practices that may include hacking, theft and skimming. Fraudsters use these practices to access your information and make unauthorized purchases with your card. There are actionable steps you can take to help minimize fraud, which include regularly reviewing your account at least once a week. It’s key to review transaction history on your account more than once a month when you receive your statement — fraud can happen at any time and it’s best to catch it as soon as possible.

Read our guide on how to report and prevent credit card fraud.

Don’t be afraid to negotiate

You may think the terms you receive with a credit card are permanent, but they can fluctuate as a result of various factors: these may include actions on your part or changes in the market. “You have far more power with your card issuer than you realize,” stated Schulz.

If there’s a month you pay late, you can request to have the fee waived. Or, if you received an offer for a lower APR, you can ask your issuer if they’ll lower your APR. Keep in mind that while we recommend negotiating, there’s no guarantee of success.

Don’t open more cards than you need

There’s no one-size-fits-all answer for how many credit cards you should have. It’s a personal decision that depends on your credit habits and needs. So if you’re comfortable managing an increased credit limit and payments for multiple cards, then an additional card can be a good idea. However, if you overspend on your current card and have poor payment history, you should think twice.

Best practices for rewards, balance transfers, 0% intro APR and secured cards

There are several different types of credit cards, which can be broken down into three main categories: rewards, intro 0% APR and secured. Each type of card offers cardholders a different range of benefits that can include earning points or cash back, financing new purchases or getting out of debt and building credit. Below, we list the three categories and some helpful actions you can take to use your card most effectively.

Rewards cards

Take advantage of the sign-up bonus — if it’s within your means. Many rewards and cashback cards offer sign-up bonuses that can provide you with a great bonus soon after account opening. For most sign-up bonuses, you’ll need to spend a certain amount of money (this can range from a couple hundred dollars to over $5,000) within a certain time period (typically three months) in order to receive the bonus.

“Make sure you understand what’s required of you before you apply, and be certain that you’re comfortable spending what is required,” Schulz advised. “No one should ever overspend just to get credit card rewards, regardless of how lucrative those rewards might be. It’s simply asking for trouble.”

Utilize the annual credits, if applicable. Select rewards and cashback cards offer annual statement credits and reimbursements for expenses that can include airline and travel purchases as well as TSA Precheck or Global Entry application fees. It’s a no-brainer to take full advantage of these perks since it won’t cost you anything and you can only save money. Plus, many cards offering these perks have an annual fee, so using the benefits can help effectively lower your annual fee.

Maximize your rewards. While it may take some work, you can maximize the rewards you earn with your card. If you have multiple cards, be aware which cards offer you more rewards for various types of purchases, whether it’s gas, grocery, travel, or other categories. For everyday purchases, a flat-rate card offering 2% or 2 points per dollar may be your best bet.

In addition to the traditional rewards program, your credit card issuer may have a shopping portal. “These websites allow you to dramatically increase your rewards earnings simply by visiting a website via the credit card issuer’s site,” said Schulz.

Balance transfer cards

Be aware of which bank issues your card. Balance transfers can only be done between cards from different banks, so if you have a balance on a card from bank A, you can’t transfer it to another card from bank A. Before you open a balance transfer card, check to make sure the card is from a different bank than your current card with the debt.

Transfer your balance within the given time period. Most balance transfer cards require your transfer to be completed within a certain time period which is typically 45 to 60 days from account opening. It’s key to transfer any balances during this window so you don’t miss out on the intro 0% APR period.

Don’t make late payments. While it’s always important to make on-time payments, it’s even more important if you’re using a balance transfer promotion. “If you’re 60 days late with a payment during that introductory period, that period can be revoked,” said Schulz.

Understand what the ongoing APR is. You may expect to pay off your entire balance before the end of the intro period, but something may arise that prevents you from doing so. Therefore, it’s important to understand what APR you’ll incur once the intro period ends. This is the APR that any unpaid balances you transferred will incur.

Check out our list of the best balance transfer credit cards.

Intro 0% APR cards

Make large purchases shortly after opening your card. The intro 0% APR period starts when you open your account, so you should make any large purchases or other purchases that you need time to pay off soon after opening your card. The clock starts ticking right away, so you’ll want to benefit from the most time with no interest charges.

Secured cards

A secured card can be used just like a traditional, unsecured card, but it has one main difference — it requires a security deposit that typically becomes your line of credit. For example, a security deposit of $200 will give you a $200 credit limit. The bank holds your security deposit in case your account becomes delinquent, but you can receive your deposit back in one of two ways: if you pay your balance in full and close your account or if you are transitioned to an unsecured card. Use your secured card responsibly, and you’ll be on your way to a good credit score and unsecured credit card options.

The tips for secured cards mainly include those listed under “general tips everyone should follow,” meaning you should pay on time and in full each month and maintain a low utilization rate. By doing so, you can be on your way to a good credit score and an unsecured (or regular) card.

Remember to graduate. A secured card should not be the card you have for the rest of your life. According to Schulz, “secured cards are stepping-stones cards,” meant to help you establish or reestablish credit and build good credit history. “If you’ve had a secured card for six months to a year and you’ve handled it well, ask your issuer if you can step up to an unsecured card. There’s a good chance they’ll say yes,” said Schulz. An unsecured card can allow you to benefit from better terms and more rewards.

Read our full guide on how to build credit with a secured card.

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