If you’re trying to stick to a budget but still want to build your credit, you’ve likely wondered what you should use your credit card for. While you can use your credit card to pay for just about everything you buy, some purchases are more beneficial to your credit health than others. Here are eight smart purchases you can make with your card.
Key takeaways:
- Many credit cards offer rewards like miles or cash back on purchases, and the more you use your card, the more you can maximize those rewards.
- Only charging what you can afford to repay in full each month will help you avoid paying interest on your purchases.
- Keeping your credit utilization ratio (how much of your available credit you’re using) at 30{e6a1e97ec1a15155ca0ed8c3e87721e561c99ed6e52274045963a20278fc2089} or below could help you boost your credit score.
What Should You Buy With Your Credit Card?
While you can purchase almost anything with your credit card, doing so may not always be in your best interest. Here are a few things you should consider buying with your credit card.
1. Cash back purchases
If you have a cash back rewards card that earns a flat rate on most purchases, using that card to buy things like groceries, meals away from home, and other daily expenses may be a good choice. You’ll earn cash back on each purchase you make.
Other credit card issuers offer additional cash back rewards on certain types of purchases. The rewards categories can stay the same each month or change depending on your card but often include purchases like gas, groceries, and certain online retailers. By making purchases that fall under your rewards card’s categories, you’ll increase the amount of cash you earn.
Maximizing your cash back rewards will help you earn money that you can use to pay down your balance or cash in for certain rewards. As an added bonus, regularly using your card can help you fix your credit over time.
2. Travel expenses
If you’re planning a trip, using your credit card to pay for your travel-related expenses, like hotel stays, airfare, car rentals, and more, can be a good option, especially if you have a travel rewards credit card.
These rewards credit cards let you earn points or miles on the purchases you make, and in many cases, you’ll earn more rewards if you’re using your card to pay for travel-related purchases. Even better, most travel rewards cards offer extra benefits like travel insurance, overseas purchase protection, and access to airport lounges.
Every travel rewards card is different, so familiarize yourself with the rewards and perks you could earn with your card before making purchases.
3. Appliances and electronics
Using your credit card to buy big-ticket items like home electronics and appliances can be a great idea. Those more expensive items often mean you’ll earn more points or rewards.
You may also qualify for additional purchase protection on those big-ticket items through your credit card issuer. If anything goes wrong with the item, you may get a refund or a replacement.
Keep in mind that some electronics and appliance retailers offer their own credit cards with additional perks. You may want to consider applying for a second credit card through them if you’re planning on purchasing a new appliance or device.
4. Online purchases
Using your credit card to make purchases online can give you added peace of mind. Credit cards typically offer purchase protection and fraud protection for online purchases, while debit cards and gift cards may not. If a hacker or a would-be thief intercepts your personal information, your credit card’s fraud protection will ensure that you’re not responsible for any unauthorized charges. That said, it’s still a good idea to use a credit monitoring app to make sure your information is safe.
5. Streaming services
Using your credit card for recurring expenses like streaming service subscriptions can be a great way to build your credit while keeping your credit utilization ratio low. These services are typically inexpensive and easy to pay off in full each month. That means you’ll be better able to avoid carrying a balance on your card and won’t have to worry about paying interest on what you charge.
You may want to sign up for auto pay for the streaming services you use. This will help you maintain an on-time payment history while still earning credit card rewards.
6. Groceries
Some card providers offer additional benefits for credit card purchases made at grocery stores. These cards often let you earn more rewards for those qualifying purchases, and some offer higher rewards for shopping at certain stores. Since groceries are part of your monthly budget, it’s easy to plan to pay them off in full each month.
7. Gas
Using your credit card can also give you access to additional rewards. Some cards have rotating bonus rewards categories that include gas stations, while other issuers offer cards that always give cash back rewards for purchases made at gas stations. And since your gas use is typically predictable month to month, it’s easy to include in your monthly budget and pay off the purchases you make in full each month.
8. Car rentals
If you’re renting a car, using your credit card to pay for the rental may be a great choice. Many card providers offer rental car insurance that covers theft or damage to the vehicle in addition to any cash back rewards or travel rewards you might earn. This can save you money on the rental since you may be able to opt out of purchasing insurance through the rental company.
When Should You Avoid Using a Credit Card?
Though using a credit card for most purchases can be a great way to increase your rewards, it’s not always the best way to pay for purchases. Here are a few instances when using a credit card won’t be in your best interest and could lead to additional bad credit card habits that may derail your budget:
- When a merchant charges credit card fees: Some merchants charge fees for credit card purchases. While the fees vary, they can add up and will make your purchase more expensive than it should be.
- When the purchase would raise your utilization rate above 30{e6a1e97ec1a15155ca0ed8c3e87721e561c99ed6e52274045963a20278fc2089}: Making too many purchases with your card or using your card to make several expensive purchases in a billing cycle could raise your credit utilization ratio beyond the 30{e6a1e97ec1a15155ca0ed8c3e87721e561c99ed6e52274045963a20278fc2089} threshold recommended by experts. This could hurt your credit score in the long run.
- When a purchase is too expensive to pay off before accruing interest: If you’re buying something major, like a car, and can’t pay it off in full when your monthly bill is due, you’ll start accruing interest. This can make the purchase more expensive in the end. If you can’t pay off what you’re buying by the end of the month, you may want to use a different payment method.
Using Your Credit Card Wisely to Build Credit
If you’ve been asking yourself, “What should I use my credit card for?” keep these eight categories in mind. By using your credit card for regular purchases and paying off what you charge each month, you’ll build your credit and may be able to earn rewards on the purchases you make.
As you make purchases, you’ll want to stay on top of your credit score and report to ensure you’re on the right track. Get your free Credit Report Card and see where you stand.
