Credit cards can be a pretty controversial topic in the money world. Are they a good thing to have? Should you avoid them all together? What rules are there for using them? How do they work!? Help! It’s all so confusing.

I’m a huge believer that if you are able to use credit cards correctly and benefit from them, they can help you in a ton of ways. You can build up a credit history, earn free rewards, and so much more. It isn’t a hard science, but it can work if you know how to work it. I try my absolute best to follow these 11 credit card rules to make sure I’m not being stupid with my money, and I think you should too! If you want to save this post for later, save it to Pinterest!

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Credit Card Rules You Should Be Following 

#1 – Don’t Apply For Too Many Cards

There are two major problems with having too many credit cards at one time.

The first is that applying for too many credit cards can really hurt your credit score. When you apply for a credit card there is a hard inquiry put on your credit report and it will lower it a couple points. Applying for a ton of cards really quickly is going to decrease the number of cards you’ll actually be accepted for, since your score decreases every time.

The second problem is that having too many cards can get really really complicated. If you have a wallet filled with credit cards, you’re increasing your chances of forgetting to pay one of them! I suggest you have 1-3 cards, depending on your situation, but not more than that.

#2 – Always Get a Rewards Card

Every credit card company/bank offers some kind of reward card that is available to you. You can earn cash back, money for groceries, free movies, or travel credits. Sounds awesome, right? 

A credit card without some rewards is just a waste of a credit card. If you’re using credit responsibly and not getting any kind of reward from it, you may as well just use cash! Personally, I have two credit cards, the first is a cash back and the second gets me scene points so I can see free movies! The scene points is my favourite because I’m a huge fan of movie dates.

#3 – Avoid Cards With an Annual Fee

Credit cards that have higher rewards usually come with an annual fee as well as the regular interest rate. This can be anywhere from $5 to a couple hundred dollars a year. This is money that you just don’t need to be spending.

There are a ton of good rewards cards that have no annual fee that you can grab and you’ll come out just fine. Use that extra money and invest it or something that will really make you money.

#4- Keep Your Limit Low

The first credit card I ever got had a credit limit of $1,000. I decided to not increase it for over four years because I never felt the need to. I’ve recently started to want to travel more and will need a credit card where I can charge plane tickets and hotel rooms. Even now, my limit is only $2,500 and I don’t ever want it to be higher.

There is a serious trap that you can fall into when you increase your credit limit. It can trick your brain into thinking you have more money available to you, when you don’t. The more money you spend on your credit cards, the more interest you’ll pay. Don’t fall into the trap and try and keep credit limits low.

#5 – Only Use Them When You Don’t Need To

Being ready for emergencies is a really smart thing if you want to be financially stable. If your only plan for emergencies is to use a credit card to pay for them, you need to start planning ahead a bit better.

When you use credit cards for things you don’t actually have the money for right now, you’re going to end up in a really bad spot and these items will sometimes end up costing double what you paid for them! If it isn’t an absolute 100% emergency, chances are the thing you’re charging isn’t a necessity and you don’t really need it.

#6 – Only Buy What You Can Afford Today

One thing you need to realize if you’re going to change your finances is if you can’t pay cash, you can’t really afford it. 

If you don’t have the money in your account right now to pay for whatever you’re about to charge on your credit card, wait. You don’t have the money, so you can’t actually afford it. Don’t get stuck in the thought pattern that you’ll have the money to pay for it next month and you’ll pay it off then. When you throw something on a credit card, you end up paying way more than it’s actually worth.

#7 – Never Carry a High Balance

Carrying a really high balance month to month creates so much unnecessary interest in the long run. You’ll end up paying hundreds of dollars a year in interest, which is just money you’re paying so banks can get richer and you can stay poorer.

Also, carrying a high balance on your credit card is going to hurt your credit score because your credit utilization will be waaaay too high.

#8 – Pay Way Over the Minimums

If you’re only paying the minimum payment each month on a credit card, you’ll be paying it off for decades! Your minimum payments are typically calculated as your interest payment + $10. This means you’re only paying $10 towards your actual debt and you’re just giving the bank free money in the form of interest.

This means you must pay a lot more than just your minimum payment if you ever want to pay down a credit card.

#9 – Know Your Interest Rates

Do you have cards that all have different interest rates? If so, it’s always a smart plan to know and understand them. If you need to charge a big purchase to a credit card, you want to make sure you charge it to the lowest interest rate card every time. Seriously, don’t charge a $5,000 item to a card with a 20% interest card if you have one that’s at 10%. That’s silly!

Knowing your interest rates will also help you to understand which cards you should pay off first. If you have one card with a 20% interest rate and another with a 12% interest rate, you should obviously pay down the 20% card first because it’s going to cost you more money in the long run.

#10 – Track Your Spending

Knowing where your money is going is super important to being smart with credit cards. People often fall into the trap of charging little items here and there and acting like it’s no big deal. If you charge a $2 coffee to your credit card every day for a month, that’s $60 that you didn’t have in your budget.

Once again, if you can’t afford to pay cash, than you can’t really afford it. 

Having a full understanding of where you money is going will help you to understand how you can and should use your credit cards. A good thing to do is to make sure you have mobile banking on your phones/computers so you can easily track what you’re charging and where.

#11 – Know and Understand Your Credit Score

Credit cards and credit scores go hand in hand. It’s very important to at least have a basic understand of how credit scores work and how good/bad yours is. Luckily, we wrote a pretty awesome post on credit scores that you can check out here!

You should also always be monitoring your credit score, I highly recommend you use a service called Credit Sesame! You can monitor your credit score completely for free. 


Final Thoughts

Credit cards can really be beneficial for you if you use them correctly and don’t get carried away. They can open a lot of doors and let you travel the world! If you have any other credit card rules you think my readers should know about, leave them in the comments below!