Building credit and using credit cards is an important long-term goal most Americans should have. Building credit allows individuals to get better deals on interest rates for loans – like car loans, mortgages, and personal loans. However, the average American uses far too much credit card debt. Last year the average American household had $6,124 dollars in credit card debt. The main issue with credit card debt is that, unless you get a special offer, the annual percentage yield (APY) individuals pay on credit card interest is really high, somewhere between 15.57% – 22.87% . And as the way to build wealth and improve our financial situations is not to be paying interest but earning it. So, if building wealth is a goal then using a credit card responsibly should also be a goal, here are a few ways to use credit responsibly.

  1. Treat credit cards like they are a debit card

The reason why the average American household has 6k or more in debt is because they aren’t treating a credit card like a debit card. If you don’t have the money budgeted or in your bank account, don’t spend the money. If it’s an absolute need then allow yourself to purchase the item but generally you should seek other financing options before you use a credit card as your last resort. Treating a credit card like a debit card will make sure that you don’t spend money you don’t have in your bank account. The idea thing is to use your credit card like a debit card and then immediately pay it off when the charges post. That way, you aren’t tempted to over spend on it. Then, the next best thing is to look for a card with good rewards on them like getting 2% cash back on every purchase with the Citi rewards card. But the surest way to not be in credit card debt is to use it as a debit card.

  1. Pay your bills on time

If you’re following rule number one, you should be in good shape to follow rule number 2. One of the biggest factors in building good credit is making your payments on time. In fact, the payment record is your largest factor in your credit score and making those on-time payments is critical to building and maintaining excellent credit.

For your payment to be considered on it, it should be received and posted by the banking intuition by the due day, and it should also cover that monthly minimum payment.  Further, making late payments will often make banking intuitions increase the interest on cards and hit the consumer with fees. Overall, paying bills on-time is an absolute must for credit card usage. However, there is a way to make sure people pay their bills on-time, and it’s with auto payments.

  1. Use auto payments

Using an auto payment feature that most banks have lets you automate your finances. Nearly all banks have these and you can typically choose when the payment is withdrawn from the account. They allow you to choose the date, choose the amount withdrawn (full credit balance, a custom amount, or the minimum payment). I recommend this as to avoid being charged fees and interests on your credit card. However, I would not recommend that anyone set their finances up and forget about them. Active management of your finances at least once a month is recommended. This is meant more for the forgetful and the occasional procrastinator.

  1. Review your statements

Even if you’re fairly engaged in your finances and making payments on-time, it never hurts to review the credit card statement when it comes in the mail/email. The reason being is that sometimes there may be things you missed. After working in banking for some time, fraud is fairly common, and also easily resolved with credit cards. But it would surprise you the amount of times people called in asking about fraud 4-6 months ago! Federal law allows you to dispute any unauthorized charges and you can do so up to at least 120 days and sometimes longer depending upon the terms of the contract. So please, review your credit statements.

  1. Maxing credit cards is a bad idea, only do it if you have to

If you HAVE to purchase items or something on credit cards, only do it if you have to. Look for other options in financing like family or friends, personal loans, or even student loans, etc. Unless you can get a credit card deal with zero interest for a year, financing anything on credit is just an overall bad idea. Not to mention, depending upon your total amount of credit, financing too large of a purchase on credit cards can negatively impact your credit.

  1. Use a budget

If you don’t have a budget, it will be harder to organize and understand your finances, that includes keeping track of your credit card. Without knowing how much you spend every month or how much money you are making per month, it’s far harder to utilize a credit card in the ways mentioned above. The above encourages the use of a budget, there are plenty of reasons to use a budget, but my recommendation is to use YNAB.


The key to using a credit card responsibly is first and foremost using it as a debit card. Everything else beyond that helps to organize your credit card usage, keep up to date on your purchases, keep debt low, and all of this is easier if you are using a budget for your finances. If individuals do the above, they will avoid debt and not be a slave to the banking intuitions. Make your money work for yourself, not them.

Lastly, if you are trying to build wealth and want to invest, try using m1 finance (you’ll get an extra $10 dollars with the referral link) it’s a great platform for long term investing. And finally, if you’re looking for further ways to enhance returns check out our high risk and ultra-high risk newsletter .

Note: the m1 referral link gives the reader $10 extra dollars to invest with if they choose to fund a taxable with $100 dollars within 30 days of opening the account or fund an IRA with $500 within 30 days of opening an account. The author of this article will receive a $10 dollar compensation as a result of the reader opening an account. The compensation for both parties occurs 30 days after the deposit occurs and assumes the full amount is retained in the account until the end of 30 days from the deposit day. YNAB offers a free month of use this will be given to both the author and reader if the reader subscribes after the free trial period and buys a month of subscription. The author uses and endorses both YNAB and M1 Finance and both links are affiliate links.

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