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  • Writer's pictureDoctor Money

4 Best Ways to Use a Credit Card Strategically

Updated: Feb 19, 2022



Despite the obvious similarity you enjoy now – paying later using a credit card shouldn’t feel like a sin. In fact, credit cards can be very useful tools to help you stick to your budget and build your credit history. Unlike cash, if your card gets stolen, you can easily replace it without much hassle.


Regardless of these benefits, the use, or rather abuse, of credit cards leaves many of us under a heap of debts regularly. According to a recent report by the Federal Reserve, Americans now owe nearly $1 trillion in credit card debt. This often makes us wonder if there is a better way to use credit cards or perhaps getting rid of them altogether is a sound decision. Our first advice is to keep these conflicting thoughts at bay and think of ways to do better. Don’t know how?


Read on to find out the smartest ways to use a credit card to enjoy the many benefits it has to offer!


4 Ways to Use a Credit Card Strategically


Using your credit card strategically is about developing good habits. Essentially, it involves a delicate balance of managing the debt incurred. Say, you purchase extravagantly and take too much debt on one billing cycle for the sake of earning more rewards. Then any rewards that you earn will be offset by the high interest that will be added after one grace period.


Luckily, by avoiding both extreme ends, there is a middle road of good strategies for credit card use with which you can avoid racking up unnecessary debt. Here’s how to ace it!


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1. Build Credit With Timely Payments


You might be responsible in all aspects of your finances, but you might still have trouble getting a loan later in life. This is usually because you do not have a consistent payment record on loans and credit cards. The best way to build credit is to purchase a few things on your credit card every month. Nothing too much, perhaps a tank of gas or a meal. But as soon as you get your bill, pay off the entire thing immediately.


This strategy is also great for staying out of credit card debt. It might seem difficult at first, but it should be the first rule of using credit cards. Doing this will help you build up credit while avoiding credit card debt and interest on your purchases.


2. Make the Most of the Grace Period


A good strategy for credit card use that also works as a short term loan is to make the most of the grace period. You might be used to paying your credit card balance in full but every once in a while, a big purchase comes up that might take weeks to pay off. The best way to go about it is to make this purchase after your statement period closes. This will give you about a month before the next statement closes and the grace period, which is at least 21 days. So altogether this could practically allow you to have more than seven weeks of an interest-free loan to pay back the amount of your big purchase.


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3. Set Your Credit Limits


Often the reluctance to have a credit card comes from the fear that you might overspend. If you worry about the same thing, you can ask your creditor to lower your credit limit to something that goes well with your monthly budget. Chances are that they will be happy to do so, after all, they want you to pay the amount back. Remember having a credit card is not about having a $5,000 or $10,000 credit limit, in fact, it is about complementing your budget.

If that doesn’t work, you can also set a self-imposed credit limit, such as $300 or $600. Once you have reached this limit in a month, you should put away your card and forget about it until you pay your balance in full. Not only will this allow you to stay on top of your financial goals, it will also build up your credit for future loans.


4. Use Your Card as a Budgeting Tool


Apart from earning rewards, building credit and cash flow flexibility, there are many other benefits of using a credit card. A strategic way to make the most of these benefits is to use your card as a budgeting tool. This means you can link your credit card to a money management tool or input your expenditure on a money management app like Doctor Money. Such a tool will use your information and match it against your budget to help you stay on track. With each purchase, you will get constant updates of how well you are doing against your limits and goals. Not only will it manage your budget well but it will also allow you to be in control of your card and not the other way around.


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Bottom Line


Credit card rewards become a lot less remunerative if you are constantly paying interest on your spending as a result of carrying a balance. However, if you know how to use credit cards the right way, you don’t have to forsake them altogether. Although it’s not a completely bad idea if you know that you cannot help yourself from misusing them.


That said, it is best to adopt a few good strategies for credit card use that will allow you to enjoy the benefits of credit cards. In fact, with cash flow flexibility and perks of credit card rewards, you give your budget a cushion for unexpected expenses. So make a good but wise use of the plastic in your wallet.


Need more help to manage your finances better and keep money matters in hand? Download the Doctor Money App to stay on top of your budget and keep your debts in check. Using your daily input, this app can create dynamic spending budgets to ensure you always remain within your means.

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