Using Credit Cards Responsibly

Credit cards can be a great way to easily pay for your daily expenses, while simultaneously build up your credit score and receive rewards for being a good consumer. However, there is a dark side to credit cards that can be a real burden on your financial health.

Today, I will discuss a few main points in using credit cards in a responsible manner, so you can improve your personal finances and maybe score some free travel while you’re at it. The only thing better than a vacation is a free vacation!

This post comes with a major disclaimer - if you have had trouble managing your spending in the past and have gotten into major credit card debt due to uncontrollable spending, I highly suggest you use a debit card for all of your spending. This way you are only able to spend the money you have in your checking account and avoid crawling back into debt. The rewards that credit cards offer are not nearly as valuable as maintaining good spending habits, avoiding interest payments, and keeping a high credit score.

Here are my best practices for using your credit cards responsibly:

Budget and Pay In Full

Before you begin using a credit card, you must abide by a monthly budget. With a credit card, you are free to spend each month up to the monthly credit line, regardless if you can pay that amount off when the payment is due. This is why it is very important to first have a monthly budget you stick to, so you are able to pay off your monthly balance in full, every month, no questions asked. If you do not pay off your balance in full every month, you will be hit with some pretty hefty interest rate payments (think upwards of 15-20%)!

Set Up Auto Payments

Have you ever missed a credit card payment on accident? All it takes is one missed payment to start racking up interest charges, and that missed payment will go on your credit score for a long time. To avoid this issue, when you open a new credit card account, the first thing to do is set up automatic monthly payments to pay the balance in FULL each month from your checking account. By doing this, you will never run the risk of missing a payment and being dinged on your credit score for years to come.

Keep A List of Your Credit Cards

If you are one that likes to maintain a few different credit cards for different spending needs, be sure to keep a secure list of your various cards. This list will serve you well in making sure you keep track of all your cards so you can monitor them on a regular basis and confirm you aren’t missing payments, being charged miscellaneous fees, or have fraudulent charges.

Sign Up For Text or Email Alerts

Nowadays, most all credit cards allow you to sign up for various alerts. I suggest you sign up for alerts to notify you when an automatic payment is made (to pay off your monthly balance), when a transaction is made, and when a new statement is available. I personally have my credit card alert set to text me each time a transaction above $1 is made. This way, when I swipe my card at the grocery store or at a restaurant, I get notified immediately and can confirm the transaction amount. If I get a text message saying a transaction was made that I didn’t actually make, I can call my credit card company immediately and freeze the account.

Dispute Inaccurate Charges

With any account you have that handles your money, you should regularly review transactions to make sure there aren’t any inaccurate charges or fees. With a credit card specifically, be sure to log into your account every week or two to go through each transaction and confirm it is accurate. Monthly statements don’t come until 15 days or so after your statement period, which is far too long to wait. This process only takes a few minutes and can save you from considerable headaches in the future.

See a transaction that looks off or isn’t yours? Get on the phone and call your credit card company immediately. The sooner you dispute the inaccurate transaction, the better chance you have of getting it fixed.

Report Lost or Stolen Cards

Much like disputing inaccurate charges, it is important that you report a lost or stolen card as soon as possible. Credit card companies are able to freeze or cancel your account immediately, so that even if someone tries using your card illegally, they will be denied (as long as you report it first!). It is quite simple to make this report and the card company will issue a brand new card and get it in the mail to you within the next day or two.

Avoid Annual Fees and Cash Advances

Credit cards come in all shapes and sizes and have a wide variety of fees. For those of you that pay your balance off in full every month, the one fee to look out for is the annual fee. There are a lot of cards out there that do not charge an annual fee at all, which I recommend you seek out. However, there are also cards that offer additional benefits that will come with an annual fee which can range from $59 to $450. It is important you know how much your card may charge you.

Sometimes these annual charges are actually worth the rewards you get, but you can usually avoid the charges and still reap the benefits. Most cards will offer no annual fee for the first year and then begin charging the fee in year 2 of having the account open. You can utilize the card for one year to maximize rewards points and either cancel the card or switch your account to a no-fee card before you are charged the fee on your first card annual anniversary date.

Cash advances are often available on credit cards, but come with a hefty interest rate charge. Hopefully you have other options available to you if you really need the cash, like an emergency savings fund. Other sources of money that are usually more attractive than a credit card cash advance would be a Home Equity Line of Credit or Personal Loan from the bank. When in a cash crunch, it is important to explore all available options to you before making a decision.

Maximize Rewards Points

This is where credit cards can be fun. However, you have to make sure you are abiding by all of the suggestions above before you focus on credit card rewards points. If you are racking up high interest rate charges or annual fees, it won’t be worth going after rewards points.

Credit cards often offer a sign-up bonus, like 40,000 points after you spend $3,000 in the first 3 months. All you have to do is simply put your regular monthly expenses on your credit card and when you hit the $3,000 mark, your account will receive 40,000 extra points. Depending on the card, these points may be used for travel expenses, gift cards, or cash credits to your account. Points are usually valued at 1%, meaning 40,000 points has a dollar value of $400.

Along with the initial sign-up bonus offer, a credit card will give you points for every purchase you make, usually worth 1-2% of your purchase price. Over the course of the year, if you place $10,000 in purchases on your card, you can receive $100-$200 in travel benefits or credits to your account.

By opening one or two new cards each year, it is not out of reach to receive over $1,000 in travel benefits annually. A great way to travel the country or world at a discounted rate, or for free!

If you really want to get deep into “travel hacking” check out websites like The Points Guy, who travels the world year-round for nearly free by taking advantage of rewards points.


Using credit cards responsibly all comes back to being a good consumer and steward of your finances. Be sure you are living by a budget and monitoring your finances on a regular basis. Is this always fun? No - but it is your financial life and you must take control of it.

By putting a few systems in place, like auto-payments and text message alerts, you will be able to easily monitor your credit cards, and receive loads of free travel each and every year.

Get Next Week’s Post By Email: Subscribe Here.