One of the most controversial topics in personal finance is that magic piece of plastic in your wallet. Everyone you ask will have a different opinion, with many just saying to avoid them altogether. While I wouldn’t call someone a fool for holding that opinion, I do honestly think credit cards have a place in your life.

The major hurdle here is assessing exactly how large that place is, and your ability to stay disciplined. Studies have shown that sliding a piece of plastic that isn’t linked to your cash makes  it easier to spend money. As a result, going overboard is extremely common. So, for those who aren’t sure how to maximize the benefits of credit while mitigating the risk, here is the answer to the golden question: When should you use your credit card?


An obvious first step is to address the main question. There are a few use cases that I find the most low-risk as far as habit-forming goes. The first is bill payment. Selecting one low-cost bill to put on your credit card each month will make sure that you have utilization to build credit, but don’t run the risk of overspending.

Bills tend to stay relatively similar every month, so “going crazy” when using a credit card to cover a bill isn’t all that tempting. If you are too young to have bills quite yet, consider using your card to cover something else that you usually already cover with cash. The important part here is to make sure you are using it once or twice a month. Keeping the use infrequent keeps you from getting used to leaning on the card.

How much?

This one is a little less subjective. As far as responsible wealth management goes, a credit card is too high-interest to be heavily utilized. I don’t care what “rewards” you get. If you were the one benefiting the most from those reward programs, they wouldn’t exist. Credit bureaus do want to see some usage every month, though, and the highest scored utilization level is typically 1-9% each month.

If you keep your bill or routine credit spending in this range, your FICO score will increase rather quickly. A more obvious underlying rule here is to never spend more than you can pay off at the end of the month. Our directive is to never get interest charged on our credit card spending– that’s money in the toilet. Pay your card off every single month in its entirety. Then watch as your credit limit and FICO score skyrocket.

Know Yourself

To close this one out, here is a vital piece of the puzzle. You need to evaluate whether you should even have a credit card. If you have filed bankruptcy in the past, or came close due to impulsive spending, having a credit card in your pocket is a bad move. If you haven’t had enough time to get into a situation that dire, but know you have spending issues, don’t try it out.

Credit cards can help you in many ways, but none are as severe as the ways they can hurt you if misused. So, take a look inward before considering any of these rules, and make sure you have the discipline to stay focused on your goals. Just like any other addiction, impulsive spending is a temptation that never really goes away. Be responsible and don’t test waters in which you have already drowned.