How You Should Be Using Your Credit Card

The Logic of Money


SEPTEMBER 18, 2019

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Knowing how to use your credit card properly can be one of the most beneficial personal financial tools.

Alternatively, not knowing how to use one responsibly can put you in crippling debt that will severely affect your financial health.

If you’re just starting out, you’re in the right place. Welcome to the complete guide about how to PROPERLY use that little piece of plastic in your wallet.

Only Make Purchases If You Could Pay Cash

Let’s get this straight before we dive into anything else:

Never EVER purchase anything on a credit card if you do not have the cash sitting in an account to pay it off at the end of the month.

The average annual interest rate on credit cards (depending on credit score) ranges from 18-26%. If you purchase something on credit and do not pay it off every month, that’s like going to the store and looking for signs that say:

On Sale Today Only!

Original Price: $100

Your Price: $126

Why would you ever buy that? It just doesn’t make sense.

What Purchases Should You Make With Your Credit Card?

Buy EVERYTHING on a credit card (with exceptions… keep reading).

This may sound like I am immediately contradicting myself… but I’m not. Here’s why.

The majority of credit cards have a rewards program that gives you cashback or points for making purchases with the card that you can later redeem for a variety of items.

I personally use the Chase Freedom Unlimited Card. It’s great. It offers 1.5% cashback on ALL purchases (3% cashback in the first year for new users up to $20,000).

It’s like getting a 1.5% discount on every single thing I buy.

The annual interest rate quite honestly doesn’t matter to me because I only spend as much money on my card as I am capable of paying off each month. The interest never accrues.

Let’s look at an example:

If I spend $6,000 a year on my credit card ($500/month), how much will my savings be?

Product Name

1.5% Cashback


Annual Spending



Annual Savings



I don’t know about you, but I would prefer to have that extra $90 in my pocket.

I have been using my credit card for the past few years and I have enough points built up to buy several pairs of AirPods, take an all-expense-paid vacation, purchase a tablet, or I can take the cash option and put it back in my bank account.

When To Not Use Your Credit Card?

The only time I advise not using your credit card (other than when you don’t have the cash to back it up) is when the store or merchant charges a fee for using credit cards (often landlords charge large fees for paying rent with credit cards, if yours doesn’t then start getting discounted rent by paying with your credit card!).

Sometimes vendors will do this because each time you swipe your card, your credit card company takes a small percentage of your purchase from the vendor. This is how credit card companies make the majority of their money. If everyone paid off their bill at the end of the month, credit card companies would make $0 on interest, so they need another source of income.

If a vendor has a fee for using credit, then it’s time to pull out your cash or debit card (I personally use Discover and get 1% cashback up to $3,000 in purchases each month) to avoid their service fee.

In Summary

Don’t buy anything (cash or credit) if you don’t have the funds to do it. Simple as that.

If you do have the funds, then always purchase it on credit, unless the vendor charges a service fee. Then opt for the debit card. If they charge a fee for that too, then pay in cash.

Doing this will start to put money back in your pocket. Everything that you buy from here on out will be on sale, a small sale, but still a sale nonetheless!

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