By Louis DeNicola | American Express Credit Intel Freelance Contributor
5 Min Read | June 26, 2020 in Cards
Responsibly using credit cards can be an important part of saving money and building credit.
Paying your credit card bill in full each month can help you avoid fees and interest.
Your credit history can impact your monthly expenses and your ability to qualify for financing, housing, and employment.
Responsible credit card use is important throughout your financial journey. Keeping a close eye on your accounts can help you avoid unnecessary fees or interest, which can help you save money now and set you up for more savings later.
In this article, we’ll discuss what it means to be responsible, what it means to build credit and how to do so.
With credit cards, responsible use generally comes down to how you use the card and whether you pay your bill on time.
One basic rule of thumb is to treat your card as if it’s a debit card. In other words, only make purchases if you already have the money in your bank account for the bill. It’s easiest to do this if you have a monthly budget and can predict your income and necessary expenses for the coming weeks and months.
That might not be realistic for everyone. For example, you may need to use a credit card for emergencies or necessities and then pay down the bill over time. Although interest can accrue, using your credit card may be the best option. You can still practice responsible use by making at least the minimum payment on time to avoid a late payment fee.
Another aspect of responsible use is knowing when and why your credit card charges fees.
For example, many credit cards charge a cash advance fee if you use your credit card to withdraw money from an ATM or at a bank. Additionally, they charge a higher annual percentage rate on cash advances than purchases. Credit cards may also have fees for foreign transactions or balance transfers.
Review your credit card’s terms and conditions to understand the potential fees and finance charges. Then, determine the best way to use your card to avoid the fees or consider getting a different card that has fewer fees.
Using your credit card responsibly can be important wherever you are in your financial journey. However, it may be especially important when you don’t have a lot of money to spare because responsible use can limit your overall expenses:
Developing good habits early on can be especially important for young people and those who are new to the U.S. and starting to build credit for the first time.
A credit card can also be an important tool if you’re trying to build or rebuild your credit. . Fortunately, the same actions that limit your expenses can also help you build good credit. With credit scoring specifically, a few of the main factors to keep in mind are:
If you don’t already have a credit card, opening a new card could help you establish or build credit.
Traditionally, a big obstacle for newcomers to the U.S. was that it’s hard to get approved for a credit card when you don’t have an established credit history. Even an excellent history of on-time payments in another country has historically meant nothing to U.S. lenders. Now, a service from Nova Credit makes it possible to use your credit history from select countries to be considered for services, credit cards, and loans in the U.S.