Credit Card Management: Best Practices

7 Min Read | Published: August 30, 2024

Explore the best practices for managing credit cards effectively to avoid credit card debt, improve your credit score, and maximize rewards and benefits.

Credit cards are powerful tools that can allow you to pay for everyday purchases, build credit, and earn rewards. But in order to get the most out of your credit cards, you’ll want to ensure that you’re managing them properly. That includes ensuring on-time payments, budgeting, spending wisely, and maximizing your rewards and benefits. Below, we’ll go over best practices for credit card management.

Tips for Credit Card Management

• Pay on Time
  The number one rule for credit card usage is paying your bills on time. Even one late payment can lower your credit score and steer you into a cycle of debt. By making timely payments, you’ll be able to avoid interest charges on most purchases (interest will still apply to certain transactions, such as cash advances and balance transfers) and help your credit score as well.¹ To prevent late or missed payments, consider signing up for autopay or set up calendar reminders.
• Try to Pay More Than the Minimum Payment
  While it’s important to make the minimum payment on time every month, it’s also a good idea to try to make more than the minimum payment and to pay off your credit card balance as soon as possible to prevent interest from accumulating.
• Budget and Spend Wisely
  You may be tempted to charge all large and small purchases to your credit card. Depending on your situation, this may cause you to overspend. You should be mindful about what you put on your credit card and only charge what you know you can repay in full every month. Using a budget, like the 50/30/20 budget, can help you keep your credit card spending in check.
• Understand Credit Card Terms and Fees
  It’s your responsibility to read the fine print and become familiar with all the terms and fees listed in your credit card agreement. Some common fees you might find include annual fees, late payment fees, cash advance fees, balance transfer fees, and foreign transaction fees. If you have a question about a particular fee, don’t hesitate to ask the credit card issuer for clarity.
• Consider Your Credit Utilization Ratio
  Your credit utilization ratio compares the amount of credit you’re currently using to your credit limit, which is the amount available to you. It’s a good idea to keep this below 30% (or even lower) as a high credit utilization ratio may negatively impact your credit score. You’ll want to pay attention to each card’s credit utilization ratio, as well as your total credit utilization ratio. To calculate your total credit utilization ratio, add up your credit card balances and divide them by your total credit limit.² You’ll also want to consider the credit utilization ratio on each card as well.
• Monitor Your Credit Report
  If you keep tabs on your credit report, you can stay informed on any changes that may affect your credit score. You should also monitor your report for potential signs of fraudulent activity on your account. You can use a tool like American Express® MyCredit Guide to get your free credit score and report. If you notice any errors or inaccuracies, you can dispute them with the appropriate credit bureaus.³

Tips to Maximize Rewards and Benefits

• Match Your Cards to Your Expenditures
  Before you take out a credit card, make sure its rewards align with your spending habits. For example, if you know you spend money on travel, a travel rewards credit card can allow you to redeem points or miles earned for flights, hotels, and other travel expenses. You may also choose to keep things simple and opt for a cash back credit card that gives you cash back on all eligible purchases.
• Claim Your Welcome Offer
  Some credit cards offer generous welcome offers. As long as you meet the requirements after you open an account, you can enjoy an incentive, such as cash back or points. Typically, you’ll need to spend a certain amount of money during the first few months your account is opened in order to qualify for a bonus.⁴
• Don’t Forget Quarterly Bonus Categories
  Some credit cards may have rotating bonus categories every quarter. For example, one quarter they may offer a high cash back percentage for all dining purchases. If you have a credit card that offers quarterly bonus categories, be sure to stay up-to-date on what these categories are and when they’ll go into effect. That way you can time your purchases appropriately and maximize your rewards. Keep in mind that you may also be required to activate bonus categories so you can earn their rewards.⁵
• Understand Credit Card Benefits
  In addition to rewards like cash back, travel points, and miles, many credit cards come with other exciting perks you can enjoy. These may include special discounts at select retailers, access to airport lounges, and even certain types of insurance. Educate yourself on all of the benefits that your credit cards offer so you don’t miss out.⁶