Credit card: What is the best and smartest way to use it?

It’s a good idea to pay for everyday purchases with a credit card. Credit card payments are convenient, generally safer than cash or debit, and can be extremely rewarding. Furthermore, if you use your cards responsibly, you will establish good credit.

The fundamentals of using a credit card are straightforward: Purchase something with it, earn rewards equal to a percentage of your purchase, and then pay your bill when it arrives (ideally in full to avoid interest charges).

However, you can personalize and optimize your credit card experience to get more value and security. Here are some tips to help you get the most out of your cards.

Balance alerts can help you keep track of your spending

When you pay with cash, it’s easy to keep track of how much you’re spending as the tens and twenties disappear from your wallet. It’s not as easy to keep track of how much you spend on a credit card (or a debit card, for that matter), especially if you’re new to credit.

Many credit card companies, on the other hand, let you set up balance alerts, which send you a text, email, or in-app message when your balance approaches a preset threshold. You could set an alert for when your balance reaches a certain threshold, such as $500 or 30% of your credit limit.

Budgeting tools can assist you with your spending

The majority of major credit card companies provide spending analysis tools that you can access through your online account. You select a time period – a month, a year, or a custom period – and the tool displays how much money you’ve spent on your card in various categories. Those categories are usually determined by the merchant where you spent your money – supermarkets, gas stations, restaurants, and department stores, for example.

Mid-cycle payments may help you improve your credit score

Every month, your credit card issuer sends information about your account to the three major credit bureaus. Your balance is one important piece of information that is reported, as it is used to calculate your credit utilization ratio. That percentage refers to how much of your available credit you’re currently using. If you have a $5,000 credit limit and a $1,000 balance, for example, your credit utilization is 20%.

Your credit score is heavily influenced by your credit utilization. It’s part of the “amounts you owe” category, which accounts for 30% of your FICO score. In general, you should aim for a utilization rate of less than 30%, but the lower the better.

Bonus malls and offers can earn you a lot of money

If you’re a frequent online shopper, see if your issuer offers a bonus mall or card-linked offers where you can earn additional rewards. If you do this, you might get 10% cash back on a purchase instead of the usual 1% to 2%. Alternatively, you could receive an immediate rebate of $5, $10, or more. Some issuers place a greater emphasis on these options than others. To see what’s available, go to your issuer’s website or app.

Changing your deadline can help you stay on track

It’s bad news if you don’t pay your credit card bill on time. You’ll almost certainly be charged a hefty late fee, and since your payment history accounts for 35% of your FICO score, a late or missed payment can be disastrous to your credit. If your credit card due date falls at an inconvenient time during the month, whether due to your schedule or your cash flow, ask your issuer if you can change it. You might be able to do so by going online or calling your issuer.