With the right card, you can do everything to build a credit score from buying large amounts of funds. Understanding common credit card usage can help you make wise credit choices. For example, if you want to save money on the next big vacation, earning points and miles with a travel credit card can help.
If you don’t have a credit card yet, think about why you want it and plans to use it. Next, you can apply for something that meets your needs.
However, you must be realistic when considering which type of credit card is best for your spending habits and financial goals. It starts by checking your credit score and verifying that your credit card application may be approved. After selecting the right card for your goal, you are ready to start maximizing.
This guide will guide you through steps on how to use your credit card wisely, allowing you to enjoy the benefits while avoiding lowering your credit score, earning credit card rewards, and guiding you on the path to credit card debt.
1. Learn how to read credit card statements
A great first step to using your card responsibly is to understand what you have in your monthly statement or a summary of your card usage over a specific billing period. They may appear different depending on the issuer and whether they are receiving their bills online, but here are the details of the important statement:
- Your new or current balance. This is the total amount you will be charged to your card. Most statements break down into previous balances, payments, credits, balance transfer or cash advances, and interest accrued from these charges.
- The minimum balance has expired. This is the lowest amount the issuer will accept for your balance. Minimum payments range from 1% to 5% of your balance, depending on the issuer.
- Your due date. This is the date when you need to pay at least the minimum amount to avoid late fees and other penalties. Most cards will be paid by 5pm on the due date to avoid postponement fees and penalties.
Credit card statements also destroy interest rate calculations as well as changes to APR and legal disclosures that cover your rights. We also provide information about your cardholder liability, what to do if you spot any unauthorized fees or errors, and, if applicable, rewards earned during that billing cycle.
2. Understand how credit card interests are calculated
Annual Rate (APR) is annuity paid for fees paid per month. However, the issuer may use a daily regular rate or DPR to aggravate your interest. DPR is an interest added to the original fee every day during the month of the billing cycle.
DPR is calculated by dividing the APR by the number of days in a year (or 360 days for some issuers). You can calculate your daily interest rate in three steps.
How to calculate daily interest rates
- Find your current statement balance and APR. Let’s say your statement balance is $1,000 and your APR is 20%.
- Divide your APRs to 365 and find your daily regular rate. In this case, 20% (or 0.02) divided by 365 is 0.05479% (OR 0.00055) of the DPR.
- Multiply your current balance by your daily regular rate. $1,000 multiplied by 0.00055 equals 55 cents.
Charging 55 cents per day may not sound much at first, but as you’re particularly interested, you might add up. Compound interest works as follows: Suppose your first day’s balance is $1,000 with a DPR of .00055, which is equivalent to 55 cents per day. On the second day, the balance will be $1,000.55 and the interest fee will be calculated based on that amount.
Calculating compound interest is complicated, but the good news is that it is likely that it will not affect too much total interest in a given billing cycle. In this example, you can multiply 55 cents by the day of the billing cycle (31 days) and earn the full amount to earn around $17.05 in interest.
3. Pay your credit card bill on time
You will make at least a minimum monthly payment by the deadline for the statement. If you missed your credit card payment, you can not only get hits in your credit score, but you could also get stuck on a postponed fee or penalty APR. You miss too many payments and your debts can go to the collection.
A better strategy is to pay your credit card bills fully whenever possible, avoiding earning interest and making your purchases more expensive in the long run. If you are unable to pay in full, please pay as much as possible by the deadline to reduce your interest balance.
To avoid the possibility of missed or delayed payments, use your card’s mobile alerts and set up your credit card Autopay for at least the lowest monthly payments.
4. Beware of credit card fees
Credit cards come with different types of fees that can sneak up on you, so it’s important to read your card contract. This document provides an overview of card fees, fees and other detailed printing. The general fees that appear on your card agreement or charge in a statement are as follows:
- Annual fees
- Balance transfer fee
- Cash advance fee
- Foreign transaction fees
- Late payment fee
Some fees that depend on how you use your card are used, signing up for a card that you won’t charge will completely avoid other fees. For example, you can find cards that do not charge annual fees or foreign transaction fees.
Also, keep in mind that credit cards can be started with an introductory APR for a specific period. Suppose you open a credit card that offers a 0% introductory APR with balanced transfer for 15 months from account opening. After these 15 months, your interest rate will return to a higher normal APR that will be applied to the remaining balance of your card.
5. Keep an eye on balance and spend only what you can afford
Regular use of your credit card will help you build a positive credit history, but be aware that you will spend a lot of the credits available. Lenders don’t like making the most of their credit cards, so FICO and Vantagescore credit scores can get soaked if they’re too balanced.
You can charge everything to your card and pay a minimum monthly balance, especially if you already deal with other obligations. However, doing this can lead to losing a large amount of money in your interest payments. Of course, it goes without saying that low debt and credit scores can make your financial situation worse. To effectively use your card when making a purchase, you only need to charge what you can afford to pay off completely each month.
Generally, keeping your credit usage below 30% is a rule of thumb. Credit usage measures how much of the available credits currently used. For example, if your credit limit is $1,000, you need to keep your turnover balance below $300. If you make a purchase that gets a balance of over $300, prioritize repaying it as soon as possible to avoid hitting your credit score. Credit usage rates account for 30% of your FICO credit score, so we recommend keeping it down.
Are you trying to remove your current credit card debt?
If you are already struggling with credit card debt, consider getting a balance transfer card with an introductory 0% APR offer. This allows you to repay the transferred balance without paying interest for a set period. Authorized credit counselors from certified nonprofits can also help you develop a debt management plan if you need additional help.
6. Improve your credit score
Building a great credit habit using a credit card is one of the best ways to improve your credit score. Paying on time and keeping your usage low can go a long way, but if you understand exactly how your credit score is calculated, you will be most successful.
For example, your FICO credit score is determined using five factors:
- Payment history – 35%
- Payment amount – 30%
- Credit history length – 15%
- Credit Mix – 10%
- New Credits – 10%
Building good habits with these 5 FICO credit score factors in mind can help you build or rebuild your credit score. Here are some examples of good trust habits:
- All payments will be made on time.
- Keep the amount that will make your obligations as low as possible.
- Keep your credit accounts active and build a long, positive credit history.
- Apply for a variety of credit accounts, including credit cards, car loans, and mortgages.
- Avoid applying for many new credits at once.
Practicing these habits over time will show potential lenders who can use their credit wisely, and your responsible credit use will be reflected in your credit score.
7. Earn credit card rewards and redeem
The big advantage of using a credit card is that you save money when you buy. To make the most of your credit card, make sure you earn and redeem all available credit card rewards.
First, track which purchases earn the most cashback, points, or miles on your card. For example, let’s say you have American Express Blue Cash Everyday® Card It offers 3% cashback on US gas stations, US supermarkets, and online retail purchases in the US (up to $6,000 per year, 1%). Every time you purchase in any of these categories, you will need to pay with that credit card to maximize your reward.
You also need to know which redemption options offer the best value. For example, we don’t realize that redemption of gift card credit card rewards is often less valuable than redeeming the same reward for travel purchases or statement credits.
Although the reward structure for all credit cards is different, learning how credit cards work and how to maximize credit card rewards can save money on almost every purchase using card points, miles, or cashback.
Don’t spend your compensation and lead you into debt
However, if you are focused on earning rewards, you can realize you are spending outside of the means, especially if you already have credit card debt. According to the 2025 tracking rewards in debt investigations, more than seven (72%) of cardholders carrying debt per month are also looking to earn rewards.
However, chasing credit card rewards while you are already in debt will not benefit you in the long run. The rewards you earn are likely to be cancelled by the interest you pay each month, so earning and redeeming rewards is a reason you have never seen before on our list of tips. Before focusing on this aspect, it is best to make sure you are already spending responsibly on your card and pay it off as often as possible.
8. Use multiple credit cards
Once you know how to use your credit wisely, consider adding a second credit card to your wallet. You can pay to choose a card that can complement your daily credit card or a few cards. For example, if you have a Chase Credit Card, adding a second Chase card to your wallet will allow you to pool the ultimate Chase rewards and increase your redemption options.
Alternatively, we recommend considering pairing it with a flat cashback reward card and a revolving bonus category reward card, giving you the opportunity to earn a high level of reward on almost every purchase.
However, you do not need to apply for another card immediately. In most cases, it is recommended to wait 3-6 months between credit card applications. So there’s no risk of damaging your credit score in too many applications.
Please note that some credit issuers have restrictions on their ability to apply for new credits or earn a welcome bonus with new cards. For example, Chase’s 5/24 rule means that cardholders who have opened five or more credit cards in the last 24 months are unlikely to be approved with a new Chase card. However, as long as you plan carefully, you can take advantage of some great credit card combinations.
What about your old credit card?
Adding new cards to your wallet will reveal that you don’t use your old cards as much. However, you will want to think carefully before canceling an unused card. These old cards will keep your credit history looking great. This is important to your credit score.
Additionally, it makes it easier to keep your credit usage low. If you don’t want to use a specific card, and you don’t pay an annual fee on that card, consider freezing and placing it in a safe place, especially if it’s one of the first credit cards.
Conclusion
Want to know how to use your credit card? Start by choosing the right card that suits your needs. Then, make all your payments on time and keep your balance as low as possible. You will learn how credit card usage affects your credit score and work to build a positive credit history. Take advantage of all the rewards and perks that come with your credit card.
Then, when you’re ready, compare cards and find moments that will help you maximize your reward.
