Being approved for a credit card is the start of building credit. There are plenty of reasons why you may want to use your credit once you obtain a credit card. However, not all uses of credit will be beneficial. Some will end up costing you more money in the long term. Here are some ways to use a credit card to build or repair credit without setting yourself up for bad credit habits.

How to Use a Credit Card to Build Credit

Using credit cards as a payment method is one of the benefits of building credit. An easy way to use a credit card to build credit is by simply keeping a credit card account open. One of the best ways to build your credit score is by maintaining a consistent payment history. Below are some tips that will help you use a credit card to build credit.

  • Keep Your Balances Low.
  • Use less than 30% of your Credit Limit.
  • Pay Your Bill on Time.
  • Pay More than the Minimum Due.
  • Pay Your Balance in Full.
  • Monitor Your Credit Card for Fraudulent Charges.
  • Store the Card for an Emergency.

Keep Balances Low

Keeping a low balance on a credit card may make it easier to pay the balance in full. With a low balance, you also reduce the amount of interest paid each month.

Use less than 30% of Your Credit Limit

Using less than 30% of your card’s credit limit is an important step in building credit. According to, credit utilization is a key factor in how FICO, the largest credit scoring agency in the U.S., determines credit scores. Keeping a low credit card balance is essential for maintaining a good credit score.

Pay Your Bill on Time

Paying your bill on time will help ensure that you won’t incur any late fees. Fees incurred by late payments increase your credit card’s statement balance, giving you more to pay off by the following due date. Payments that are at least 30 days past due can lower your credit score.

Pay More than the Minimum Due

By paying more than the minimum amount due, you could keep your credit utilization ratio low. The lower the balance that remains on your card each month, the less interest you will have to pay.

Pay Your Credit Card Balance in Full

While paying more than the minimum amount due may lower your credit utilization ratio, paying your credit card balance in full ensures that you won’t have to pay any additional interest.

Monitor Your Credit Card for Fraud

Fraudulent charges on your credit card will cause your card’s balance to increase, adding interest to your next statement. Consistently monitoring your card may ensure that any fraudulent charges are accounted for and removed from your credit history.

Store the Card for Emergency

Simply keeping your credit card account open could help you build credit in the long run. Since the age of your accounts affects your credit score, storing your credit card for emergencies will ensure that you have at least one open account.

The Best Way to Use a Credit Card

While building or repairing your credit is a great way to use your credit card, there are other benefits to using a credit card as a payment method. Many credit cards offer extra incentives for using them. These perks include cash back, rewards points for retail, and airline frequent flier miles. With the additional incentive for using credit cards, you could build credit while saving money on necessities such as gas or groceries.

Benefits of Using Credit Cards as a Payment Method

  • Cash Back Incentives
  • Retail Rewards Points
  • Airline Frequent Flier Miles
  • Purchase Protection for Larger Purchases

When Not to Use Your Credit

Credit cards are a convenient and accessible payment method that also helps you to build credit. Still, their convenience can prove risky to new credit card users looking to build credit. New credit card users without a plan for using and paying off their credit cards are in jeopardy of getting into credit card debt, which can negatively impact a credit score. In order to prevent this, here are a few examples of when not to use your credit card.

Examples of Bad Credit Card Use

  • When You Can’t Afford to Pay for the Purchase in Cash
  • Making Purchases Without a Repayment Plan
  • When the Balance is Close to the Credit Limit
  • Large Impulse Purchases

When You Can’t Afford to Pay for the Purchase in Cash

Using a credit card for purchases that you can’t afford to pay in cash could potentially decrease your credit score by incurring additional debt. Adding unnecessary debt to your credit card balance is not advisable for someone looking to build credit.

Making Purchases Without a Repayment Plan

Making purchases on your credit card without a plan for how to repay the card is risky for someone looking to build credit. Without considering how to pay off purchases made on the card and implementing a set spending limit, the risk of falling into additional debt is high.

When the Balance is Close to the Credit Limit

Making purchases on a credit card when the balance is close to the credit limit is also risky for those looking to build credit. Not only does this lower the balance-to-available-credit ratio, but it also puts the borrower at risk for being denied future credit.

Large Impulse Purchases

Credit card users should take caution not to be impulsive with their purchases. Impulsive purchases, especially large ones, put users in jeopardy of acquiring large amounts of credit card debt and possibly lower credit scores.

Credit Cards vs Personal Loans: How They Work Together

Credit cards are a great tool for building credit when used carefully. A good credit score opens doors for obtaining loans for large purchases that are difficult to make with a credit card.

Best Egg Loans Take the Stress out of Large Purchases

Best Egg offers personal loans that make paying for large purchases more manageable. Personal loans assist borrowers in making major purchases, paying for home improvements, and funding significant life events such as parenthood. Credit card users who find themselves stuck in credit card debt could benefit from our credit card refinancing loans. With low rates, intuitive tools for managing payments, and friendly service, Best Egg empowers users to take control of their credit.