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Do you have a credit card that just sits in your wallet, reserved for occasional large purchases or a financial pinch?
It's valid to keep a credit card for only the above reasons, but doing so may mean missing out on some excellent benefits. Using credit cards to make day-to-day purchases can have major perks, especially if it's a rewards card. Regular spending on a credit card can also help build your credit and give you additional protections, though you need to be mindful of how much you put on the card and your ability to responsibly pay off your purchases.
Perks of Using Credit Cards for Everyday Purchases
Using your credit card for daily spending rather than just occasional purchases often comes with several major benefits. Keep in mind, though, you should use your credit card for purchases you already would have made otherwise, and to never spend solely in pursuit of rewards or other benefits. Use your credit card as you would a debit card or cash, on purchases such as groceries, gasoline and utility bills. Here are some of the perks of using credit:
Build Your Credit
You may already use a debit card for everyday purchases since it pulls funds directly from money you have in your checking account, but this activity doesn't go on your credit report. 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.
Your credit card account activity, such as balances and repayments, appear on your credit report and help you establish a credit history lenders can look at to assess your creditworthiness. If you keep your balance reasonably low and make on-time payments every month, you'll contribute to the positive growth of your credit history and scores.
Strategically Earn Rewards
One of the best arguments for using credit cards for everyday purchases is the potential to earn rewards in the form of cash back or points you can redeem for things like travel or hotel stays. If you use a credit card for day-to-day spending rather than a debit card, then pay it off at the end of each month before interest kicks in, your rewards earning potential increases drastically.
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 (such as travel or dining). If you use your card on these purchases, you can maximize your credit card rewards.
Take Advantage of Generous Consumer Protections
While debit cards typically don't offer any protections on purchases, your credit cards may provide many types of security features and other safeguards that can save you money or help protect you from fraud. Part of this is because credit cards and debit cards are covered by different laws. With credit cards, you're protected from fraudulent use of the account, and most issuers have a zero-liability policy for unauthorized purchases that means you won't owe anything for purchases made without your knowledge or consent.
Protections on debit cards, on the other hand, aren't always as generous, and if you catch the fraud too late, you might be on the hook for the full amount. That's why many experts recommend making online purchases with credit cards instead of debit cards; it's safer if your card information is compromised.
Then there are other perks you won't find with debit cards. For example, many credit cards offer extended warranties or purchase protection on items you buy with the card, in addition to price protection, which gives you a refund if the price of something you purchase with the card drops after you buy it.
Easily Track Your Spending
Credit cards send you monthly statements that show all of your monthly transactions, which can make it easier to track spending than if you use cash. Most also have online apps that make it simple to keep tabs on your spending. While debit cards have this functionality too, this feature of credit cards can help you make sure you only spend within your means.
How Using Your Credit Card Everyday Can Impact Credit Scores
As we mentioned, using your credit card for your everyday spending has plenty of benefits—but you should always carefully monitor your spending to prevent it from becoming a drag on your finances and credit. Here's what to watch out for:
Your Credit Usage Can Affect Your Credit Score
Any credit card you're issued will be assigned a credit limit, but the lender won't tell you you're actually not supposed to use that full amount. A credit card balance that's close to its limit increases your credit utilization ratio, which lenders and credit scorers see as a red flag. On the other hand, maintaining a low credit utilization ratio can actually be beneficial to your credit scores.
To help keep your credit scores in tip-top shape, it's recommended that you maintain your credit utilization ratio at 30% or less (the lower, the better). This means if you have a card with a $10,000 credit limit, try to keep your balance below $3,000.
Have a Plan to Pay Off Your Credit Card Debt
Swiping a credit card or tapping your phone for contactless purchases makes spending money easier than ever. Without cash physically leaving your hands, you may feel a sense of detachment from spending money, which for some may result in overspending. If you decide to use your credit card for everyday purchases, it's crucial you make sure to only use it for things you would otherwise be comfortable buying with your debit card. Make sure you can pay off what you're putting on the card on time each month, especially if you want to avoid making interest payments.
There are some things you should avoid putting on a credit card if possible, especially impulse purchases. Avoid the temptation to overspend simply to get rewards or fulfill sign-up bonuses. If you begin to live beyond your means, you can find yourself caught in a cycle of debt that could be hard to get out of, and may eventually hurt your credit.
Best Credit Cards for Day-to-Day Purchases
In the market for a credit card that's perfect for everyday shopping? There are many factors to consider as you shop around, including your specific needs and spending habits. Here are a few popular credit cards ideal for day-to-day spending, none of which have an annual fee.
- Blue Cash Everyday® Card from American Express: Get 3% cash back on grocery store purchases (up to $6,000 in purchases per year, after which you'll get 1% cash back), 2% on gas and department stores and 1% on everything else. If you're seeking additional rewards and don't mind paying a $95 annual fee, consider Blue Cash Preferred® Card from American Express.
- Discover it® Cash Back: Earn 5% cash back on up to $1,500 spent on purchases in rotating quarterly categories (activation required) and 1% on all other purchases.
- Capital One® VentureOne® Rewards Credit Card: Get 1.25 miles per dollar spent, which can be redeemed for all types of travel. If you want a higher rate of return and don't mind paying an annual fee, check out the Capital One® Venture® Rewards Credit Card.
Tips for Using Your Credit Card Responsibly
If you've only ever used credit cards occasionally, it can be an adjustment to switch to using it in place of a debit card for everyday purchases. Make sure to follow these tips on using a credit card wisely:
- Aim to keep your credit utilization ratio at 30% or lower, and never max out your card.
- Don't buy things you can't afford; credit makes it easy to live beyond your means, but this is not sustainable. Only charge what you can pay off at the end of the month.
- Make on-time payments. Late and missed payments harm your credit, whereas a history of on-time repayment helps build positive credit. If you're likely to forget to pay your bill, set up calendar reminders or automatic payments for at least the minimum payment amount.
Find the Right Credit Card for Your Wallet
If none of your credit cards have reward programs appealing enough that you want to use it every day, consider trying Experian's CreditMatch™ tool. You'll get customized credit card offers based on your current scores that won't impact your credit.