How to Use a Credit Card Responsibly

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Contributor, Benzinga
Updated: January 11, 2021

Building credit can unlock important keys for your future, like the ability to buy a car, house or even commercial real estate. If you’re new to credit cards, you may be surprised to know that even experienced cardholders don’t know exactly how a credit card works. 

Recent data from the Federal Reserve cites personal U.S. credit debt at $870 million — an all-time high. But when used responsibly, a credit card can be a valuable tool to manage money, build credit and earn rewards.

Ready to build your credit and learn how to use a credit card responsibly? Here’s how to do it.

Main Takeaways - Using Your 1st Credit Card:

Before you get started building credit, go in with clear goals for your use. Here are some ground rules to get you started:

  • Decide what terms and rewards you want with your card. This includes the interest rate you're offered on payments, if there is an annual fee, whether you get cash back on purchases and more.
  • Prepare to apply for approval. You will have to apply for your card and disclose personal information that includes your Social Security number, current salary and other factors.
  • Properly using your credit means learning how to pay off your bills. We explore options for payment below.

How to Find the Right Credit Card

A simple Google search can show you that there are hundreds of credit card types to choose from, and it can be difficult to find the right one.

Be sure to consider the following factors before you make your decision:   

  • Annual percentage rate (APR). This is the price you pay for borrowing money. Your interest rates are known as your yearly rate. You can avoid paying interest on purchases if you pay your balance in full each month by the due date. 
  • Annual fee. Some cards have no annual fee and others range from $25 to a few hundred dollars. You can get this fee waived just by asking the carrier — just ask.
  • Rewards programs. Earn points for your next airline tickets, hotels or gift cards to your favorite stores.   
  • Grace period. This is the number of days you have to pay your bill in total before finance charges kick in. A grace period usually lasts between 21 and 25 days, and a payment due date is the same every month. Be sure to bookmark your credit card due date if you want to avoid paying interest.  
  • SoFi Credit Card
    More Details
    Annual Fee
    Regular APR

    13.24% – 25.49%

    securely through SoFi Credit Card's website
    More Details
  • Luxury Card
    More Details
    Annual Fee
    $495 ($195 for each Authorized User added to the account). Terms and conditions apply*.
    Regular APR

    For Titanium, Black and Gold Cards: Ongoing Purchase APR 16.49%; Cash Advance 26.74% (variable)

    securely through Luxury Card's website
    More Details

    Terms and Conditions apply*

  • Indigo Credit Card
    More Details
    Annual Fee
    $0 to $99 based on credit worthiness
    Regular APR


    securely through Indigo Credit Card's website
    More Details
  • Milestone® Mastercard®
    More Details
    Annual Fee
    $35 to $99 based on credit worthiness
    Regular APR


    securely through Milestone® Mastercard®'s website
    More Details

Getting Approved for a Credit Card

Lenders will look at your credit profile and other things, like income or debt-to-income ratio, which is the relationship between how much debt you have to how much income you bring in. Let’s take a closer look at the process so you can get the approval you’re looking for.    

What information you’ll need 

You’ll be required to provide your name, date of birth, address, Social Security number, whether you rent or own a home, employment status, sources of income and total annual income. Your income is always important because it can indicate whether you’ll be able to pay your bills and how much credit you’ll be given. 

The application process

Once you’ve decided which card you want, you must fill out an application. This is a simple and straightforward process, whether it’s on paper or online. Before you fill out your information, be sure to read the card’s terms and conditions.

All rate and fee disclosures are available for review. You have every right to see this information before you make a commitment with a credit card provider.  


Once you get approved for a particular credit card, one of the first things you should know about your new card is your credit limit. This is the maximum amount of money you can charge to your card. Your interest rate is also important because it affects the cost of carrying a balance on your card. 

Most credit cards will give you a reason to use their card, usually in the form of rewards such as cash, points or miles. How does this work? Generally, you earn a certain number or percentage for every dollar you charge on your card. 

Spending Money on Your Credit Card

You might feel you can swipe and have anything you want at a moment’s notice. But it’s important to be mindful of how you spend your hard-earned money; start by learning how to create a budget

Utilization rates

Your credit utilization is how much of your available line of credit you use any given time. To figure out what your utilization rate is, simply divide your credit card balance by your total card limit. The ideal overall credit card utilization is below 30%. 

Where you can spend 

You may be surprised to find some businesses accept certain credit cards but not others. This normally has to do with the fee structure the merchant (especially mom-and-pop shops) must pay.

That’s because when you use your credit card, the merchant must pay a processing fee for each transaction, so you may find yourself pulling out an American Express card to pay for something when the business you’re purchasing from only accepts Visa.

Be sure to check with the merchant before you shop.

Where you should and shouldn’t spend 

It’s obvious that the world is moving from cash payments to digital payments. But when is the best time to use your credit card? When you’re traveling, a credit card is perhaps the best payment method you can use.

From booking your trip to paying for your hotel and rental car, you can earn rewards or cashback for things you’re going to buy anyway. You also get a little extra security if you lose your card because there’s no liability for fraudulent charges, and you can cancel or freeze your card at any time. 

When you travel out of the country, you’ll get better rates for foreign exchange fees than buying currency with American dollars. There are also places in the world where you might not want to use your card. For example, flea markets are a good place to use cash.

Never use your card on a website if you’re not familiar with the site or if the site has an obscure foreign extension.  

Spending and rewards

Credit card rewards are different for each card, but almost all of them give you a benefit for using your card more. Points rewards tend to equal 1 point for each $1 you spend.

The best reward credit card programs are usually available to consumers with the highest credit scores, but in general, you can earn a certain number or percentage of rewards for every dollar you put on your card. Some cards will reward you for spending in a particular area or only give you rewards based on specific purchases.   

Paying Your Credit Card Off

Americans are close to a trillion dollars in debt. In 2018 alone, they paid over $104 billion in credit card interest and fees. More than 40% of all households in the U.S. carry credit card debt, and the average American household carries a balance of $6,375.

Do you find yourself a part of this group? If so, it’s a good idea to limit your spending and formulate a game plan to pay down your bills.  

When you should pay it off

Each month, your payment must be made by a certain date established by your credit card issuer. This is 1 of the most important credit card rules to follow, as it is your official payment due date. You don’t want to miss it or you’ll be charged with late fees.

Timely payments also help you build a good credit score. 

The easiest way to figure out when your credit card bill is due is to carefully read your credit card billing statement. Making your payments early (and in particular, a few days before the due date each month) is the best way to make sure your payment arrives on time and keeps your account in good standing.  

Interest and other fees

It’s also important to know how credit card interest rates work.

Your yearly rate is better known as APR or annual percentage rate. Credit card companies use it to determine the interest charge on your monthly statement. There are two kinds of APR: a fixed APR usually remains the same but can change in specific circumstances, such as when an introductory offer ends or your payment is more than 60 days late. 

A variable APR changes with the prime rate. Many variable rates begin with the prime rate, then add a margin, which is your variable APR. Other types of APR you’ll want to know about are purchase APR, balance transfer APR and cash advance APR. 

Use Credit Cards the Right Way

Today, there are almost 480 million credit cards in circulation. That’s 100 million more than a decade ago. Though Americans swipe at a record pace, it doesn’t mean you have to go into debt. Your credit card can be a powerful financial tool if you use it the right way.    

Want to learn more about credit card and money best practices? Check out how to pay off your credit card debt, or our guide to the best budget apps to keep your finances in order.