In this article we’ll cover:

  • The benefits of using a credit card over cash and debit cards

  • Different types of cards (rewards, membership points, etc.)

  • How to choose your credit card

  • When to pay your card and how much

  • How credit cards interact with your credit score

More than half of credit card reward holders who pay their full statement balance each month are missing out on the rewards their credit cards provide. Think about that – most consumers who are able to cover their financial obligations are actually missing out on the benefits of their card(s). The simple reason is these individuals do not know how frequently they should be using their card, and do not know the specific purchases to make with each card.

You should use a credit card for nearly everything you buy. The benefits are numerous:

As the chart demonstrates, credit cards have a huge advantage over cash in almost every way. One element that will not be stressed in this article is the Annual Percentage Yield (APY). As long as you pay your statement balance each and every month, the APY will not apply. Unexpected expenses may result in a balance that is more than the cash you have in your checking account; however, each individual and/or household should have an emergency fund to cover these expenses so that the statement balance can be paid each billing cycle. Learn how to build an emergency fund here.

How to Use a Credit Card

The good news is: there are many beneficial ways to use credit cards. These benefits largely depend on the card – let’s take a look at cards for specific spending habits.

The Traveler

For someone who travels a lot, there are specific cards with membership and reward points specifically for travel.

You’ll notice these cards offer rewards on airline tickets, hotels, dining, and more. These cards also have membership points that are accessed once you reach a certain spending amount. Lastly, these cards give you access to lounges and provide reimbursements for TSA Precheck and Global Entry fees.

But let’s say you’re not a big traveler, or you just want to find a card that you can use for everyday purchases. The key item to note is the rewards earned for each card.

The Everyday Spender

These cards provide cash back rewards for specific purchase categories. It is important to choose and use a card that provides cashback for the items you are purchasing.

  1. The American Express Blue Cash Everyday® Card

    • 3% on groceries at US supermarkets not exceeding $6,000 per year

    • 3% on US online retail not exceeding $6000 per year

    • 3% on gas at US gas stations not exceeding $6000 per year

    • 1% on other eligible purchases

  2. Chase Freedom Unlimited®

    • 5% on travel purchased through Chase Ultimate Rewards

    • 3% on dining at restaurants

    • 3% on drugstore purchases

    • 1.5% on all other purchases

The Business Owner

These cards are best for those making purchases on behalf of their business.

  1. American Express Blue Business Cash™ Card

    • 2% cash back on everyday eligible business purchases, up to $50,000 per calendar year (1% after $50K).

    • 1% cash back on all other eligible purchases

  2. Chase Ink Business Preferred®

    • 3 points per $1 on the first $150,000 spent in combined purchases

    • Unlimited 1 point per $1 on all purchases.

*Cash back rewards are in dollar (cash) form whereas rewards points accumulate and are used to purchase things such as flights and hotels.

How Credit Cards Affect Your Credit Score

First off, the best practice with credit cards is to pay off the card’s statement balance.Yes, you can pay the minimum payment amount, but that only protects you from late fees and penalties—not interest. Eventually, only paying the minimum amount will create a snowball effect, where the unpaid amount on each statement quickly turns into a seemingly insurmountable balance.


You also want to make sure you pay off your statement balance to maximize the positive effect on your credit. Credit card companies report your payment history to the national credit bureaus. The more you pay off the full statement balance on the credit card, the more positive reports the credit bureau receives, which provides a positive impact to your credit score. As you may have guessed, failure to pay your credit card balance and/or the accumulation of debt on your card will have a negative impact.

Lastly, you want to keep a low utilization rate of about 10% of the card’s total credit limit. If your card limit is $10,000, keep the card balance under $1,000 at all times if possible.

Your Next Steps

  1. Analyze your spending habits. Do you travel often? Spend a lot on specific categories like grocery stores, drugstores, or streaming services? Do you make purchases for your business?

  2. Research credit cards that maximize reward/cash back points for your spending habits. For example, if you spend a lot of money at drugstores, find a card with the most points for drugstore purchases. It is highly likely you will need more than one credit card.

  3. Apply for credit cards that fit your spending habits.

  4. Use credit cards for nearly all your purchases. Be sure to use the card that provides the maximum points/cashback for the items you are purchasing.