Using your credit card responsibly (2024)

FAQs

What are the 2 rules for using a credit card responsibly? ›

The interest you pay will increase the cost of everything you buy with your credit card. Paying your balance each month shows lenders that you're a responsible borrower. Regularly making late payments or missing payments will hurt your credit score.

The 2/3/4 rule: According to this rule, applicants are limited to two new cards in a 30-day period, three new cards in a 12-month period and four new cards in a 24-month period. The six-month or one-year rule: Some issuers may only let borrowers open a new credit card account once every six months or once a year.

Pay Off Your Balance

The golden rule of credit card usage is to do everything you can to pay off your entire balance each month. If you can do this, you won't be charged any interest.

By paying your debt shortly after it's charged, you can help prevent your credit utilization rate from rising above the preferred 30% mark and improve your chances of increasing your credit scores. Paying early can also help you avoid late fees and additional interest charges on any balance you would otherwise carry.

Paying your bill as soon as you get it.

Don't wait until the last due date to pay it, because there is a lag between when the bill is issued and the date due, during which you may be charged interest on your previous month's balance.

Bottom line. If you have a credit card balance, it's typically best to pay it off in full if you can. Carrying a balance can lead to expensive interest charges and growing debt.

Is it good to have a credit card and not use it? ›

Not using a credit card isn't necessarily a bad thing. However, it can come with some unintended consequences. Although charging inactivity fees is no longer legal, issuers have other options at their disposal — some of which could affect your credit score, your available credit and more.

Credit card issuers may lower your credit limit due to inactivity before closing. Credit card issuers don't need to give you a notice about your closure due to inactivity — they can do this at any time.

Pay your balance every month

Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.

RULE #2: KEEP YOUR CREDIT UTILIZATION RATIO LOW

In short, a credit utilization ratio is the amount of money you spend divided by the available credit your credit card gives you.

1-in-5 rule: This states that you can only apply for one American Express card every five days. 2-in-90 rule: You can only be approved for up to two American Express cards within a 90 day period.

Use your Credit Card wisely and regularly:

You may have bought a Credit Card for emergency purposes. However, if you don't use your credit card continuously for a certain period of time, it incur additional charges. To avoid this, use your credit card for small purchases every couple of months.

The Equal Credit Opportunity Act prevents creditors from discriminating against individuals. The Fair Debt Collection Practices Act established rules for debt collectors. The Electronic Fund Transfer Act protects consumer finances during electronic payments.