The phrase “use it or lose it” is a good one to keep in mind when it comes to credit card habits. How frequently you use your card can impact your credit score, help you avoid fees, keep your account active—and even earn you some great rewards! By asking yourself (or us!) “How often should I use my credit card?” , you're already on the right track.
In this article, you'll find the answers you need and learn how to avoid common pitfalls like account closures. Plus, we'll cover when it’s better to use a credit card vs a debit card.
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Why credit card usage matters
Effective credit card usage is crucial for building and maintaining a strong credit score. “Using a credit card every month and paying off your balance on time has a positive impact on your credit score,” says Dennis Shirshikov, a finance professor at the City University of New York.
This is because two major factors influence your score. The first is your payment history, which refers to how consistently you pay your bills on time. The second factor is your credit utilization ratio.
“Credit utilization refers to the percentage of your available credit that you are using,” Shirshikov says. “Keeping it under 30% is ideal for maintaining a healthy score.”
This means if you have a credit limit of $1,000, you should aim to keep your balance under $300 at any given time. Regularly using your credit card while keeping your balance low is an effective way to improve or keep your credit score.
In addition to credit score considerations, using your credit card responsibly can help track your expenses, manage cash flow, and create healthy financial habits. Consistent usage also lets you take advantage of the convenience, fraud protection, and rewards that credit cards offer—as long as you pay your balance in full each month.
How often should you use your credit card?
So, how frequently should you use your credit card? Shirshikov recommends making small purchases at least once a month. “This consistent usage shows lenders that you can manage credit well, and it helps keep your account active,” he says. “Optimizing your credit score involves keeping spending below 30% of your credit limit and spreading it across multiple months rather than having large spikes of usage.”
When should you not use a credit card?
There are certain situations where using a credit card might not be the best choice. If you're trying to stick to a strict budget or avoid accumulating debt, it's better to use cash or a debit card.
Similarly, for small, everyday purchases that can be easily covered with available funds, avoiding a credit card can help prevent unnecessary spending. Additionally, when you know you won’t be able to pay off the balance in full by the due date, it’s better to avoid using a credit card to prevent interest charges from accumulating.
Effects of not using your credit card regularly
If you neglect to use your card for an extended period, it can have some unintended consequences that may negatively affect your financial health. “The issuer may cancel the account due to inactivity,” Shirshikov says. “This can negatively affect your credit score by reducing your available credit, which increases your credit utilization ratio.”
Even though you may not be using the card, it’s important to understand that keeping your account open is beneficial for your credit profile. “Even minimal usage can prevent cancellation—just a small charge every few months is enough to keep the account open and active,” he says.
Tips for managing credit card usage
Here are some practical tips to help you manage your credit card usage wisely, so you can build a strong credit history and avoid unnecessary debt:
1. Create a usage plan
Using a credit card is all about balance. You don’t want to overuse your credit card and end up with debt, but you also don’t want to underuse it and miss out on opportunities to build credit. Shirshikov says that frequent credit card use can be beneficial as long as you treat it like cash and only spend what you can afford to pay off immediately.
A good approach is to reserve your credit card for strategic purchases. “I recommend using your credit card exclusively for fixed expenses like utility bills or groceries,” the expert says. “This ensures you’re using the card regularly while not risking overspending on discretionary purchases.”
2. Pay off the full balance
“Paying off the balance in full each month builds a strong payment history, which is one of the most significant factors in determining your credit score,” Shirshikov says. On the other hand, paying only the minimum can lead to higher interest costs and extend your debt repayment period, so it's best to avoid it whenever possible.
3. Set reminders for yourself
Consistency is key. Make sure you never miss a payment by setting reminders or automating small, recurring payments. This method takes the guesswork out of credit card usage and helps you avoid late payments, which could harm your credit score. Automatic payments on your credit card can also simplify your financial routine.
4. Diversify usage
If you have multiple credit cards, managing them effectively is also important. Rather than using just one card for all your purchases, try diversifying your spending across your cards—maybe you decide to use each one for specific types of purchases. This strategy can help you maximize any rewards and cashback benefits of your credit cards while keeping overall usage balanced across accounts.
When should you use a credit card and when should you use a debit card?
Choosing between a credit card and a debit card depends on your financial goals and the specific situation. Each option has its advantages, and knowing when to use each one can help you manage your finances effectively.
Credit card: “Use credit cards for purchases where you want added consumer protections or when you're looking to build credit,” Shirshikov says. “Credit cards often offer fraud protection and dispute capabilities that debit cards lack.” This makes credit cards an ideal choice for online shopping, travel, or pricey purchases where you want peace of mind.
Debit card: “This is best for situations where you want to avoid the risk of overspending or are more comfortable spending from your available funds rather than credit,” Shirshikov says. Accumulating debt on a credit card can lead to high-interest payments, which can quickly become unmanageable if not addressed. To avoid this, a debit card is a safer option and should be preferred for everyday expenses.
FAQs
How often should I use my credit card to build credit?
To build credit effectively, experts recommend you use your credit card at least once a month for small purchases and always pay off the balance in full. This helps establish a strong payment history, which is crucial for improving your credit score.
Is it better to use a credit card for daily use?
Using a credit card for daily expenses can be beneficial if you're disciplined about paying it off in full each month. It helps build credit and earn rewards, but you should ensure that daily use doesn't lead to overspending or debt.
Is it OK to use your credit card a lot?
It's fine to use your credit card frequently as long as you're spending within your means and paying off the balance in full. Frequent use can build credit and earn rewards, but carrying a balance or exceeding 30% of your credit limit can negatively impact your credit score.
How often should you use a credit card to keep it open?
To keep your credit card active and prevent account closure, aim to use it at least once every month. Even a small purchase can ensure the account remains open and your credit utilization ratio stays healthy.