Credit Card Tips and Guidelines

You’ve likely seen the commercials promising you instant access to the lifestyle of your dreams through a credit card. Or you’ve received an envelope congratulating you on your preapproval for a limited-time opportunity. It all seems so easy: buy now and pay later. But while credit cards offer convenience, they also come with risks. That’s why understanding some essential credit card tips and guidelines is key to using them wisely.

Understanding Credit Cards

Credit cards are a form of revolving debt. You borrow up to a set limit, repay some or all of it, and borrow again. There’s no repayment schedule or deadline for paying off the full balance. Your credit limit (or maximum borrowing amount) will be determined by your credit score, income and financial history.

Understanding the annual percentage rate (APR) is critical. The APR is the interest charged on unpaid balances, and it can vary depending on the card type, your creditworthiness and market interest rates. Credit card APRs are typically much higher than rates charged for mortgages, auto loans or bank loans. Additional credit costs may include annual fees, late payment fees, balance transfer fees and foreign transaction fees.

Smart Credit Card Tips for Everyday Use

Higher interest rates (and potential fees) mean that the cost of borrowing on your card will become more expensive, increasing the amount you owe over time. Paying off your debt too slowly can result in a debt spiral, where you’re unable to make significant progress on your debt, leading to accumulating interest and ever-growing stress due to the increased financial burden.

To help you stay on top of your finances, check out these six guidelines for using your credit card wisely.

1. Treat your credit card like cash.

Create a budget and use your card only for essentials or planned purchases — instead of impulse buys. Only charge what you can afford to pay off immediately. In most cases, if you can’t buy it with cash, you don’t need to buy it with credit.

2. Pay off the entire balance every month.

Credit card issuers send out monthly statements that list the total purchases for the period and the total accumulated balance owed. You can pay the entire amount owed by the due date or just the minimum payment (calculated as a percentage of the outstanding balance).

Paying the minimum amount due each month may seem manageable, but it can result in significant long-term costs, as interest continues to accrue on the unpaid balance. By paying off the entire balance each month, you avoid interest charges and benefit from any rewards program the issuer may offer.

3. Track your spending.

Review your monthly statements to ensure you’re staying within your budget. This will also help you spot any fraudulent or unauthorized charges.

4. Maintain an emergency fund.

Many people accumulate credit card debt due to unexpected expenses, such as home and auto repairs, appliance breakdowns, medical bills or periods of unemployment. Create an emergency fund — ideally with three to six months of living expenses — to avoid relying on credit cards for such situations.

5. Avoid cash advances.

A cash advance allows you to borrow money against your card’s credit limit, most commonly through an ATM. However, unlike regular purchases, which start to accrue interest at the end of the month, cash advances begin to accrue interest immediately. Use your debit card or go to your bank if you need cash.

6. Limit the number of cards you have.

If you make informed decisions with your credit card, you can reap numerous potential benefits from using it.

The Benefits of Using Credit Cards Wisely

If you make informed decisions with your credit card, you can reap numerous potential benefits from using it.

• You can enjoy the ease of transactions, especially as a simple way to document transactions and as more businesses move to contactless payment and limit cash acceptance.
• Many card issuers offer rewards such as cashback, travel points or purchase discounts. Just be careful that these rewards do not encourage overspending.
• Credit cards typically offer the advantage of fraud protection, limiting your liability in case your card is stolen or used without authorization.
• Making timely payments and paying in full can help build your positive credit history. Conversely, missing payments or maintaining too high balances can negatively affect your credit score.

These benefits only come with disciplined use. Following these proven credit card tips and guidelines helps ensure you stay in control of your finances.

Looking for more help? Check out our helpful resources and calculators. Also, browse and watch our webinars for tips on money management and good financial stewardship for additional guidance in handling your financial resources wisely.

At GuideStone^®, we want every servant of Christ to finish well. Our mission is to enhance the financial security and resilience of those who serve the Lord.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433) Monday through Friday, 7 a.m. to 6 p.m. CT, to speak with a customer solutions specialist.