You’ve undoubtedly seen the commercials and ads promising you quick access to the products and experiences of your dreams through an easily obtainable credit card. Or you’ve received an envelope congratulating you on your preapproval for an amazing financial opportunity. It seems so easy: buy now and worry about paying later. Credit card usage has been increasing in recent years, driven by consumer spending and easy access to credit. A credit card can be a convenient financial tool, but you must also be aware of its significant risks so you can make wise decisions and reap the benefits.

## The Fundamentals of Using Credit Cards

Credit cards are a form of revolving debt, meaning you can borrow up to your limit, repay some or all, and borrow again. There’s no repayment schedule or deadline for paying off the full balance. They come with a predetermined credit limit or maximum borrowing amount. This limit will be based on your credit score, income and other financial factors.

The interest charged on outstanding balances is the annual percentage rate (APR). The APR can vary depending on the card type, your creditworthiness and market interest rates. Some cards offer a 0% APR introductory period, meaning you won’t be charged interest during that time.

Credit cards often come with other costs, such as annual fees, late payment fees, balance transfer fees and foreign transaction fees. Paying on time and limiting transfers and transactions to only those necessary can help minimize the cost of using a credit card.

## How to Use Your Credit Card Wisely

The critical thing to remember about credit cards is that their interest rates are much higher than that of a mortgage, auto, or bank loan. These higher interest rates mean that the cost of borrowing on your card will become more expensive, increasing the amount you owe over time if you pay your balance off slowly.

This can result in a debt spiral, where you’re unable to make significant progress on your debt, leading to accumulating interest and ever-growing stress due to the increased financial burden. To help you stay on top of your finances, check out these six guidelines for using your credit card wisely.

### 1. Treat your credit card like cash.

Create a budget and use your card only for essentials or planned purchases instead of impulse buys. Only charge what you can afford to pay off immediately. In most cases, if you can’t buy it with the cash you have, you don’t need to buy it with credit.

### 2. Pay off the entire balance every month.

Credit card issuers send out monthly statements that list the total purchases for the period and the total accumulated balance owed. You can pay the entire amount owed by the due date or just the minimum payment (calculated as a percentage of the outstanding balance).

Paying the minimum amount due each month may seem manageable but can lead to significant long-term costs since interest still accrues on the unpaid balance. Since a large portion of the payment goes toward interest, the balance will be reduced very slowly. By paying off the entire balance every month, you can avoid interest charges while benefiting from any rewards program the issuer may offer. Additionally, paying off the balance in full can positively impact your credit score.

### 3. Track your spending.

Review your monthly statements to ensure you’re staying within your budget. This will also help you spot any fraudulent or unauthorized charges.

### 4. Maintain an emergency fund.

Many people accrue credit card debt due to unexpected expenses such as home and auto repairs or appliance breakdowns, medical bills or periods of unemployment. Create an emergency fund — ideally with three to six months of living expenses — to avoid relying on credit cards for such situations.

### 5. Avoid cash advances.

A cash advance allows you to borrow money against your card’s credit limit, most commonly through an ATM. However, unlike regular purchases, which start to accrue interest at the end of the month, cash advances begin to accrue interest immediately. Use your debit card or go to your bank if you need cash.

### 6. Limit the number of cards you have.

Having fewer credit cards will make it easier to track your spending and payment due dates and monitor for fraudulent activity. This will also reduce the temptation to overspend, allowing you to stay within your budget.

## The Benefits of Using Credit Cards Wisely

If you make smart decisions with your credit card, there are many potential benefits to using it.

- You can enjoy the **ease of transactions,** especially as a simple way to document transactions and as more businesses move to contactless payment and limit cash acceptance.
- Many card issuers offer **rewards** such as cashback, travel points or purchase discounts. However, if you’re not careful, these rewards can also encourage overspending.
- Credit cards typically offer **the advantage of fraud protection,** limiting your liability in case your card is stolen or used without authorization.
- Making your payments on time and keeping balances low can help build your **positive credit history.** Conversely, missing payments or maintaining too high balances can negatively affect your credit score.

A credit card can be a convenient financial tool, but it carries significant risks and requires disciplined financial management to receive its fully enjoy its advantages.

Looking for more help? Check out our helpful [resources](https://www.guidestone.org/Resources) and [calculators](https://www.guidestone.org/Resources/Education/Calculators). Also, [browse and watch our webinars](https://www.guidestone.org/Resources/Education/Webinars) for tips on money management and good financial stewardship for additional guidance in handling your financial resources wisely.

At GuideStone®, we want every servant of Christ to finish well. Our mission is to enhance the financial security and resilience of those who serve the Lord.

For more information, contact us at *[Info@GuideStone.org](mailto:Info@GuideStone.org)* or **1-888-98-GUIDE** (1-888-984-8433) Monday through Friday, 7 a.m. to 6 p.m. CT, to speak with a customer solutions specialist.

GuideStone

Credit and Debt Management

You’ve undoubtedly seen the commercials and ads promising you quick access to the products and experiences of your dreams through an easily obtainable credit card.

DEBT | Jan 8, 2025

Credit Card Tips and Guidelines

By: GuideStone

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