Is It Smart To Use Your Credit Card Every Day?

If you have a credit card that is just sitting in your wallet unused, then it might be a huge waste. While keeping a credit card in reserve to make the occasional large purchase in a pinch is certainly a viable use of it, you may be missing out on some excellent benefits. Using your credit card for everyday spending can help build your credit score and earn you rewards you would otherwise miss out by paying with cash and debit card.

This doesn’t mean you should go out and start making purchases which you can’t pay back! To enjoy these benefits, you will need to practice good credit habits and be careful with what you spend on. 

Benefits of using credit cards on everyday purchases

Just as long as you spend reasonably and responsibly, the use of credit cards for everyday purchases can have a huge beneficial impact on your finances. Here are some examples of why it is such a good thing:

It builds credit

Having a good credit history is key to ensuring successful loan and card applications in the future. This means banks are more confident in your ability to repay them and are thus more confident in approving your financial requests. 

Unfortunately, using debit cards and cash will do little to nothing to improve your credit score. If you want to build your credit, one of the easiest ways to do so is to use a credit card regularly and responsibly pay off as much as you can every month.

Earn rewards strategically

One of the perks that is widely advertised as an advantage of credit cards is the ability to earn points and rewards. However, if your card is just sitting in your wallet doing nothing, you will likely never see these rewards. 

From cash back to points you can redeem for things like travel or hotel stays, by using your credit card every day, you will slowly accumulate enough rewards to get yourself something nice. Keep in mind that some rewards cards have permanent or rotating bonus categories that allow you to earn a higher rewards rate on certain types of purchases.

Consumer protection

Credit cards are not as risky as many make them out to be. In fact, they come with many built-in failsafes to ensure that your money is as safe as possible. For example, you might be fully liable for any fraudulent purchases made with your debit card. However, you are not completely out of luck if you happen to get scammed while using a credit card.

Remember, a credit card is a sort of loan. This means that the money you are using is not technically yours, but the bank’s. So if something goes wrong with your purchase, you have some time to go to your bank and dispute the transaction. More often than not, your bank can help you with the issue and not charge you for the purchase. Many credit cards also offer purchase protection on items you buy with the card, giving you some leeway to refund certain items.

Keep track of your spending

Purchases made with your credit card are fairly easy to keep track of. This is useful for a number of reasons, security and budgeting being chief among them. Credit cards send you monthly statements that show all of your monthly transactions. As such, you can see exactly what you have spent on and how much you have used, making it much simpler to budget accordingly. 

This statement also acts as a paper trail for you to refer to if you happen to suspect that your card has been used without your consent. For the most part, most credit cards tend to also have an online app associated with them. This makes it easy and convenient to keep tabs on your spending.

How using credit cards everyday impact your credit score

The use of your credit card for everyday spending has many benefits, but you should always keep in mind that misuse of your cards can also lead to many problems. You will need to be even more careful with your spending habits and budgeting if you intend to use your cards daily, as mistakes can lead to a drop in your credit score.

Here’s how using a credit card for everyday purchases can impact your credit score, positively or negatively:

Increases your credit score	Decreases your credit score
Building your payment history - A history of making credit payments on time is the largest factor that determines your credit score. - Paying off your balance in full at the end of every month will help you avoid credit card debt. - You can also set up autopay features to ensure that you are never late on payments.	Late payments - Your payment history is arguably the most important factor that affects credit score. - Making a 30-day late payment can result in a negative mark on your credit report and a reduction in your credit score.
Maintaining low credit utilisation - Low credit utilisation means spending much less than your credit card’s limit. - Apart from paying off your balance every month, low credit utilisation is also a major factor that affects your credit score. - The general rule of thumb is to spend 30% or less of your total monthly credit limit.	High credit balance - If your credit card balance is often close to its assigned limit, you will start to make lenders nervous. - Such things will be seen as a red flag and lenders will be less confident in you to pay back what you owe.

Using your credit card responsibly

If you’ve only ever used cash or a debit card up till now, you can start trying to make adjustments to use your credit card on a daily basis. Just remember to spend responsibly and keep your credit balance low. 

It also goes without saying that you should never buy things that you cannot afford. Always remember that a credit card is a loan, and that money needs to be paid back. Speaking of which, don’t forget to make your payments on time. As long as you are punctual with your payments, you will have no issues with keeping your credit score up.