A credit card can be a valuable financial tool. When used responsibly, credit cards can help you build strong credit and earn rewards, like cash back, travel benefits, and more. And the more you use the card, the more chance you have to earn those perks. But—like any financial tool—a credit card only truly has benefits if you are smart about how you use it and only spend what you can afford. That is why it may make sense to use a credit card for daily expenses—items you already have allotted in your budget that you can pay off promptly. Consider the pros and cons of using your credit card for daily expenses before you tap or swipe.

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How to Manage Daily Expenses with a Credit Card

Handling your daily expenses with a credit card is fairly simple: You will pay for everything you would normally buy with your credit card rather than with a debit card or cash. Then, you pay your credit card bill with funds from your checking account at the end of the billing period.

To make this approach financially sound, you must pay off your full balance every month. By paying off your full balance each billing period, you will ensure that you do not accrue any interest on your purchases. If you accrue interest, you will end up spending more on the same purchases than you would if you paid with a debit card or cash. You could also choose to pay off your credit card balance weekly or bi-weekly for budgeting purposes and to ensure you do not overspend.

What are the Benefits of Using a Credit Card for Daily Expenses

Managing your daily expenses with a credit card is a simple switch, and it can have a lot of benefits.

  • Credit cards are secure: Credit cards are safer to carry than cash, as you have little to no recourse if cash is lost or stolen. Credit cards also often have more consumer protections for fraud than debit cards. If your credit card is used for fraudulent purchases, you will generally not be able responsible for the purchases and you will not lose any money. If your debit card is used to make fraudulent purchases, the funds come directly out of your account. You should be able to recoup your money when you report the fraud, but it may take some time to sort everything out. Your balance will be impacted until the fraud is resolved, meaning you could have issues with insufficient funds.
  • Build and maintain good credit: Responsible use of a credit card is a strong way to build your credit. If you make regular purchases and pay your balance off in full each month, you will demonstrate a responsible credit history and your overall creditworthiness, which should positively impact your credit score. Note: It is important to pay off your balance in full as often as you can, as credit utilization (or how much of your available credit you currently are using) impacts your credit score. A low utilization ratio is best for your credit.
  • Maximize rewards and cash back: Many credit cards offer cash back or rewards through points or miles that can be used towards merchandise, travel, gift cards, cash back and more. The more you spend on your credit card, the more opportunities you have to earn rewards and cash back. As long as you stay on top of paying your balance, these rewards can be an extra incentive and help you save.
  • Tracking spending is simple: Budgeting can be more straightforward when you put all of your daily expenses on one credit card. You can track your spending and your card payments easily on your statements or through your credit card provider’s app. Many financial institutions that offer credit cards have budgeting tools or credit monitoring available as well.

How to Use Your Credit Card Responsibly

There are a few important things to remember when using your credit card for daily expenses to ensure that you maintain good financial habits. Making late payments or carrying a high balance on your credit card can negatively impact your credit score, so here are a few tips to ensure you are smart about how you use your credit:

  • Always pay on time: It is ideal to pay your full balance every billing period, especially if you are using your credit card to pay for budgeted daily expenses. But even if you cannot pay the full balance, the most important thing you can do is pay your bill on time. On-time payments help build good credit. Consider setting up automatic payments to ensure you never miss a payment.
  • Keep your balance low: Avoid maxing out your credit card, and if you must carry a balance on your card between billing periods, keep it low. This will positively impact your credit utilization ratio.
  • Spend within your budget: It can be tempting to spend more than you would typically when you have a credit card. Stick to your budget and avoid overspending so you do not end up with a balance that will accrue interest.

Credit Union 1 offers many credit card options that can fit your financial goals. Explore credit card options online, at your nearest branch, or by calling Credit Union 1.