Before I learned how to use a credit card wisely, I had a negative view of credit card debt.
I equated credit cards with debt. That is, until I climbed out of debt.
It was only then that I realized credit card debt isn’t necessarily a bad thing.
And, once I learned how to use a credit card wisely, I saw that a credit card is actually a powerful tool.
If you know how to use a credit card wisely, it means you understand how to leverage other people’s money to benefit personally.
You can get a lot of perks from using credit cards the right way. For example, using a credit card and paying it off is an excellent way to build your credit.
They can also help you keep better track of your spending and avoid fraudulent purchases.
Speaking as a woman who has been there and done that, I know firsthand the challenge of getting out of debt, as well as the power that comes from taking control of your credit cards.
Women and Credit Cards
Before I tell you my top 5 ways to use a credit card wisely, we have to have an honest conversation about women and credit card debt.
Credit.com claims, “Though more than 75 percent of all Americans have at least one credit card, and the average person has 3.7 with about $5,600 in outstanding balances, women are more likely than men to mishandle their accounts and run into larger debts as a consequence.”
Here are some more statistics representing problematic behaviors:
- 60% of women regularly carry a balance from one month to the next.
- 42% of women only pay the minimum required each month.
- 29% of women have faced penalties for late credit card payments.
- 16% of women were hit with fees for exceeding borrowing limits.
Plus, with the gender gap still an issue, it is not surprising that studies found, “More than one in four female cardholders (26%) say they are ‘not at all’ confident in being able to pay their bills in full this month, nearly double the percentage of men at 14%.”
However, both genders tend to spend more money when using credit cards.
The Federal Reserve Bank of Boston found an even bigger disparity between cash and non-cash transactions. According to their 2016 report, “The average value of a cash transaction was $22, compared to $112 for the average non cash transaction.”
That’s a 409% increase.
All this to say – be very careful with credit cards.
Credit cards cannot be powerful financial tools if your spending habits are out of control. In these situations, they’ll hurt you more than helping you.
Instead, take control of your finances first, and then, take the power back from creditors and learn how to use a credit card wisely.
#1 Use a Credit Card to Manage Cash Flow
Credit cards make it easy to track your discretionary spending in one place and manage your cash flow.
For this reason, many women I know use credit cards for essential purchases, such as gas and groceries.
With all essential purchases in one place, it makes it easy to see how much money you need to cover your expenses each month – and budget accordingly.
The key to using a credit card this way is to pay off the balance at the end of each billing cycle rather than paying the minimum and incurring debt.
#2 Use a Credit Card to Earn Rewards
Ask most people how to use a credit card wisely and they’ll say use it to earn rewards.
According to the 2018 TSYS U.S. Consumer Payment Study, 79% of cardholders named rewards as the most attractive feature of their preferred card.
The TSYS study found that 80% of respondents redeemed cash back rewards.
- 47% redeemed gift card rewards.
- 38% redeemed merchandise.
- 33% redeemed travel rewards.
- 21% redeemed experience rewards (such as concert perks).
When you use your credit card for the rewards, it means you know you are using the credit card to gain something rather than go into debt.
For example, if you spend $1,500 a month for various expenses that can be put on a card and get 2% back, that’s $30 in your pocket each month — or $360 a year.
I have a Discover card because they offer pretty sweet rewards promotions. They offered 5% cash back on Uber for a while, so I changed my Uber account to use the Discover card.
For the fourth quarter this year, they are offering cash back on all Amazon, Target, and Walmart purchases, so I’ll be using my Discover for all Amazon purchases to earn that reward.
My mom racks up points throughout the year, and her credit card allows her to cash in reward money for gift cards, which she gives for birthdays and Christmas.
Plus, you can use a rewards credit card solely for earning airline miles for vacations.
To be wise with your rewards credit card – use your credit card for shopping to earn rewards but pay off the balance at the end of the month.
#3 Use a Credit Card for Travel
Yes, certain cards allow you to earn airline miles for travel.
But there are other reasons credit cards are great for traveling.
If you use one credit card for all your trip expenses, you can easily track your spending and budget to pay the entire trip off in a reasonable amount of time.
Credit cards are also safer to use than debit cards or cash. Most cards offer fraud protection and will alert you to any fraudulent activity.
Additionally, some credit cards offer trip cancellation/interruption insurance. With this perk, users can get reimbursed for travel expenses if they use the same card (i.e., you can’t get reimbursed for lost baggage if you didn’t book your flight using that credit card).
#4 Use a Credit Card to Protect You from Fraud
When purchasing anything online, I always use my credit card. Then, I pay it off.
I do this to avoid the hassle of dealing with possible fraud. I don’t know about you, but I would rather have my credit card compromised than my bank account drained.
Plus, credit card companies strive to protect you from fraud.
Experian explains, “While they’re not required to, many major credit card issuers provide zero-liability fraud protection. This means that regardless of when you discover that someone has used your credit card without your permission, you’ll never be on the hook for a cent of it.”
#5 Use a Credit Card to Buy Big-Ticket Items
Another way to use a credit card wisely is to use it to finance big-ticket items.
If you can’t pay off the balance in full or in a reasonable amount of time, it might not make sense to put the purchase on a credit card if you’re paying the normal APR.
See if you can get a card with 0% financing or a low-interest card.
For example, purchase furniture using a credit card with no or low interest. If you have the money to pay the furniture off in a reasonable time, and you can earn rewards from the credit card purchase, then go for it.
However, this only works if you are purchasing big-ticket items you really need and can afford. The key is to have a date in mind to pay off the purchase and stick to it.
If you can’t get a 0% or low-interest card and can’t pay it off the next billing cycle, it’s advisable to stay away from this option.
Check Us Out on YouTube for More Crazy Sexy Money Tips.
Disclaimer: I am not a financial planner or expert. All information in the post is my opinion and should not be used as financial advice. This is based solely on my experiences. Any action you take based on the recommendations from this blog is at your discretion. This post contains some affiliate links. If you click on an affiliate link and purchase a product/service, I may receive a small commission at no extra cost to you. However, I only recommend products, services, and/or businesses that I love and believe will add value to you.