How to use credit cards like a pro
Spending money is easy. Doing it wisely can take some skill. We can help you learn how to use your credit cards the right way.
When you know the best way to use a credit card, you're better able to safeguard your financial security. Wisely using credit cards can be the difference between building good credit, which can help you achieve your future goals, or digging yourself into debt that could take years to pay off.
Credit card pros use credit cards not only for convenience, but also as part of a larger strategy to maintain financial flexibility, and over time, build a strong credit history.
Whether you're just starting out with your first credit card or have been using them for years, you can always afford to revisit the basics. Here are nine tips to help you use credit cards like a pro.
- Choose the right card for you.
- Know your credit card's terms and conditions.
- Pay your credit card bill on time, every time.
- Pay the full balance when possible.
- Regularly monitor credit card transactions.
- Report a lost or stolen card immediately.
- Take advantage of rewards you earn.
- Use travel notifications.
- Set up spending alerts.
1. Choose the right card for you.
There are so many different credit cards out there that it can be hard to know which is best for you. Before you choose, think about your financial habits. If you tend to not pay the full balance each month, research cards with a low interest rate. Just know that cards with lower interest rates tend to come with fewer rewards.
If rewards are a priority, make sure the rewards match your lifestyle. An airline rewards card won't help you if you're not a frequent traveler. A card with good cashback rewards may be more fitting.
Before you apply for a card, read more about how to choose a credit card.
2. Know your credit card's terms and conditions.
After choosing the credit card that best fits your lifestyle, read your cardholder agreement and make sure you understand its terms and conditions.
What happens if you make a payment late? Will you pay a one-time penalty, or will your interest rate increase?
In addition to reading about the potential fees and penalties, see which benefits and features you may be entitled to.
3. Pay your credit card bill on time, every time.
One of the most important rules of using credit is to pay on time, every time. You can set up automatic payments to ensure that happens.
Missed payments stay on your credit report for up to seven years. This can make borrowing harder in the future.
4. Pay the full balance when possible.
It can be tempting to make only the minimum payment, especially when your budget is tight. But regularly paying the minimum amount will cost you more in interest and take longer to pay off.
Why? Because the remaining balance rolls over to the next month and accrues interest. Paying down the full balance each statement period helps you avoid interest charges.
Of course, unexpected costs happen and you may not always be able to pay your balance in full. If this is the case, make a plan to pay off your debt. Make it a priority in your budget.
5. Regularly monitor credit card transactions.
Review your credit card transactions at least once a month. This is important for three reasons. First, it helps you stay on budget. Second, you may notice areas where you can spend less in the future, like subscription services that you can cancel to save money. Third and most important, it can help you catch fraudulent charges while you still have time to dispute them.
Am I liable for credit card fraud?
In the United States, the Fair Credit Billing Act limits consumer liability for credit card fraud. According to this law, creditors must allow consumers 60 days to dispute a charge and limits their liability to $50 if their credit card is lost, stolen or used fraudulently. Many credit card companies have also adopted zero-liability policies.
Know your options for disputing credit card transactions.
If you see a transaction that's unfamiliar to you, you should contact your credit card company immediately to dispute it.
Depending on your credit card provider, disputing credit card charges may be as simple as clicking a button on the company's website or mobile app. USAA members can report fraudulent charges by calling the credit card department, or visiting the Security Center.
Check your credit report.
At least once a year, check your credit report to see if you've been a victim of credit card fraud or identity theft.
Your credit report will also reveal fraudulently opened cards or accounts. You can obtain free copies of your report from the three major credit reporting agencies at annualcreditreport.com.
Learn more about how to help keep your credit cards safe.
6. Report a lost or stolen card immediately.
If you misplace your card, check your transaction record and let the company that issued the card know immediately. You can usually do this through their website or mobile app. They will either close the card and issue you a new one, or "freeze" the card to prevent it from being used until you've found it.
One way to keep from losing your card in the future is by adding it to your digital wallet. Then you can tuck your card away safely and instead use your phone to pay at places where they have tap to pay technology.
7. Take advantage of rewards you earn.
Take advantage of rewards such as cash back or points. You can redeem points for many things such as merchandise, travel, and even donations to charity as a few examples. Cashback rewards can often be deposited into your checking account or applied to your credit card balance to lower the amount you owe.
Depending on the card, some purchases may earn you more rewards than others. If you know when to use which card, you can take full advantage of your rewards program.
Before you book travel, explore your options. You may be able to use rewards to get discounted fares. Some credit cards come with travel insurance, which may reimburse you for otherwise nonrefundable plane or train tickets if there is a travel interruption.
Some credit cards even come with built-in auto rental collision coverage so cardholders don't have to purchase extra insurance when they rent a car. Look into these possibilities to help you understand what protections you have available as you plan your next vacation.
8. Use travel notifications.
Credit card companies typically have built-in anti-fraud protection that helps protect you from unauthorized transactions. This is a helpful safety measure but can cause problems when you travel. You don't want to land in another country on vacation only to find out you can't use your card.
To help avoid this, some credit card companies ask that you set up a travel notification to let them know when and where you'll be traveling. This tip is useful for military members who often travel. Between deployments, temporary duty and drilling weekends, taking time to become familiar with the travel notification can help make the travel process smoother.
However, the practice of setting up travel notifications is becoming a thing of the past. Many companies now have robust fraud capabilities that make this step unnecessary. If you're unsure, call your credit card company.
9. Set up spending alerts.
Spending alerts can help you monitor your card's usage in real time, which can help you document your spending and also enable you to notice fraudulent charges as soon as they happen. Depending on your credit card provider, you may be able to set up notifications for every transaction or purchases above a certain amount.
You may also be able to get notified when your credit usage reaches a certain level. This can help you keep a lower credit utilization ratio, which can help your credit score.
Credit card management is an ongoing process.
Knowing the best way to use a credit card is one thing, but putting it into practice is another story. Real pros don't rest on their laurels; they continually reassess their performance. The final step in being a credit card pro is to revisit this advice, be honest about your own habits and keep improving.
The USAA Advice Center provides general advice, tools and resources to guide your journey. Content may mention products, features or services that USAA Federal Savings Bank does not offer. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates. All information provided is subject to change without notice.