Using Credit Cards Responsibly

There are two components to responsible credit card use: spending wisely, and paying wisely. Doing both is important because these habits will affect your ability to be approved for other forms of credit later in life, including loans for buying a house or a car.

living_budgetKeep in mind that credit is not free money. Credit is borrowing money from a financial institution, so be careful to borrow only what you know you can repay. As you prove to the bank that you are a creditworthy person, your credit limit will increase. For some people, a higher credit limit causes them to spend more than they can repay. If this is the case for you, call your credit company and ask them to lower your credit limit. Also, do not “max out”—or borrow up to your credit limit—each month. Try to keep your borrowing below 25% of your credit limit. For one thing, this assures that you will always have credit available if you have a true emergency such as an unexpected medical bill or car repair. For another thing, consistently borrowing 100% of your credit limit can drastically lower your credit score and adversely affect your ability to get new forms of credit in the future.

The best way to pay your credit card bill is to pay it in full and on time every month. This way, you will not be charged any interest, and you will prove your creditworthiness. Make sure to read your statements thoroughly to check for suspicious transactions and to see if the balance makes sense. You can choose how much of the bill you want to pay in any given month. There should be a boxed section of the statement explaining how long it would take and how much you would end up paying if you continually made only the minimum payment. You may always make more than the minimum payment, but if you fail to make the minimum payment, you will be charged a late fee of at least $30. Both of these habits will lower your credit score. To avoid this, always pay your entire balance by the date your payment is due.

Can I Pay a Credit Card Bill Using Another Credit Card?

Technically, you can use another credit card to pay off one credit card; however, this isn’t a wise choice in the long run.

If you continually pay your credit card bill with a different credit card, you are only accumulating more debt to be paid off later. Furthermore, if you plan to continue to use the original card and switch the balance between the two every billing cycle, you will eventually hit your credit limit. This habit will drastically lower your credit score, and you will one day find yourself with a lot of debt, unable to be approved for credit of any kind—including home loans or rental agreements. That said, a balance transfer—moving the balance from one credit card to another—can be a useful tool in lowering your debt if you transfer to a card with a low interest rate, like one with a 0% introductory APR. Be aware that if you have too much debt, you won’t be able to be approved for this second card.

The only responsible way to use a credit card is to pay it off each month. If unemployment or emergency bills or repairs make this impossible, make repaying the debt your first priority in order to keep a decent credit score and maintain your financial health.

What Do I Do if I Find Fraudulent or Suspicious Activity on my Bank or Credit Card Statement?

If you find deposits, withdrawals, or payments on your bank account or credit card statements that you do not recognize, take immediate action to protect your identity and your money.  If other people share the accounts with you, check to see if they are responsible for the unusual transactions. If they are not, or you do not share the accounts with anyone, call the bank or credit company to report the fraudulent activity.  Sometimes these reports must be submitted in writing; see your statement for specific submission details.  If necessary, cancel the card or close the account to ensure the security of your finances and your identity.


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