The Broke Person’s Guide to Credit Cards

Stop using your credit card to rack up high-interest consumer debt and start using it to boost your credit score instead!

Credit cards are a tricky thing. On the one hand, you can use one to earn great rewards or miles, keep your credit score in shape, and even cover the rare emergency expense. On the other hand, they can also be a one-way ticket to expensive debt, a lousy score, and a financial life lived one paycheck at a time. It all depends on whether you use the card responsibly.

“A credit card can be a payment method or a debt machine!” said Financial Lifeguard and author Christine Luken (@FinLifeGrd). “I advise my clients to first ask themselves honestly if they can be trusted to use a credit card as a payment method that they pay off in full monthly. There are a few things we can proactively do to ensure that a credit card doesn’t turn into a debt machine.”

Career bank officer Laura L. Mael of Settlers Bank (@settlersbankwi) observed that “We are a society where you have to have debt to get debt (i.e. home, car, and business loans) at the same time, we don’t teach responsible use of it.”

Well, that’s exactly what we’re trying to rectify. If you’re on a tight budget and are want to start using your credit card to build your credit score instead of your debt, here are the things you should do.

Treat it like a debit card.

The easiest way to rack up burdensome debt on your credit card is to spend money that you don’t actually have. That’s why Evan Sutherland, Co-Founder of (@BudgetingCoupl), recommends just using your credit card like it’s a debit card.

“When you swipe your debit card, money automatically gets withdrawn from your checking account to make the payment. Let the same be true for your credit card,” he said. Every time you swipe your credit card, pay off that balance immediately.”

“This means you can only use your credit card if you’ve got the cash to back it up. Follow this one simple rule, and you save $1,000+ dollars/year in cash back opportunities, and watch your credit score climb to 800 or above.”

And even if you can’t get your score that high, avoiding high-interest debt will be reward enough.

Keep your credit limit low.

If you’re a credit card newbie or someone who’s had some previous difficulty with overspending, then don’t give yourself the room to pile on extra debt.

“Keep the credit limit low and something that could reasonably be paid off if need be,” said Mael. She went on to recommend that you base this limit on your monthly disposable income or savings balances.

And what about if you end up maxing out your card? Well, a lower limit means less debt to pay down. “If you do happen to max out a $500 or $1,000 credit limit, you could work some overtime or a side hustle to easily pay it off,” offered Luken.

Set limits for yourself.

While we don’t recommend maxing out your card every month (seriously, it will likely have a negative impact on your score), you should be able to set a monthly spending limit on the card and then hold yourself to it. If you can’t do that, you probably shouldn’t have a card at all.

“To responsibly use a credit card, you need to have some self-control and set yourself a limit for monthly spending on it,” Jacob Dayan, CEO and co-founder of Community Tax (@communitytaxllc) and Finance Pal. “Set a limit that you know you will be able to make the minimum monthly payment.

“Ideally, you should try to pay it off every month to not accrue any interest on your bill. Doing so is a sure-fire way to help you build up your credit score. Plus, having little to no debt on a credit card comes in handy in emergencies where you need to pay for something in a hurry,” he added.

Only use it for small monthly expenses.

“Using a credit card solely for small monthly expenses is the simplest way to boost your credit score,” said Roslyn Lash (@RosLash), an accredited financial counselor and the founder of Youth Smart Financial Education Services.

Additionally, only using your card for small, regularly-occurring expenses will help you keep a cap on your overall spending. It will also prevent you from using your card on shiny, new purchases that you otherwise wouldn’t be making.

“Only use the card for items you would already be purchasing (gas, food, utilities etc),” said Mael. “Don’t use it to purchase the extras that you want.”

Track your spending closely.

Many folks have experienced that awful sinking feeling when they’ve checked their credit card balance and discovered that it’s way, way higher than they thought it was. How could this be, they wonder.

Well, it’s probably because they weren’t keeping track for themselves of how much money they were spending.

As Mael put it:

“Each time you make a purchase on that credit card, write the amount out of your checkbook so when you go to pay the bill at the end of the month you have the cash to do it with (you could also deposit the money into a separate account if that’s easier to keep track of).”

And if you don’t have an actual checkbook, that’s no excuse. A notes app should work fine, or an actual note as well. You can also check out some of the personal finance apps listed in our App Directory that will help you track your spending.

Pay your bill every month.

This one’s pretty simple. You’re going to have a credit card bill due every month, which means that you have to pay your bill monthly. Not only is this one simple, it’s basically non-negotiable.

Ideally, you should be paying off the entire thing every month. But even if you aren’t, you still need to be paying at least the minimum amount due.

In order to keep yourself honest, Mael recommended that you “never add charges in a new month if you haven’t paid off the previous month’s charges.”

Never forget that one late payment recorded on your credit report could have a serious effect on your credit score.

Make it harder on yourself to even use your card.

Self-control can be difficult to master. In order to get yourself into the habit, you can go above and beyond by making your card difficult to access. Literally.

“Make it harder on yourself to even use your credit card in the first place,” said Luken. “Leave your physical card at home so you’re not tempted to spend money you don’t have while you’re shopping or out on the town. And don’t save your credit card information on websites which are a temptation to you.

“This is also a good idea anyway because it will protect you from fraud,” she added.

Set up auto-pay.

“Put your credit card on autopay, and set it to cover your full statement balance” advised Sutherland, noting that, “now you won’t even have to remember to pay off your card. Your only responsibility at this point is to always have enough money in your checking account ready cover your upcoming credit card bill. Then let autopay do the rest.”

Of course, this will have to be paired with a rigorous approach to credit card spending so that you don’t end up zeroing out your checking account and incurring bank overdraft fees. As Sutherland noted, this is a slightly more “advanced” tip. It’s one you should start trying until you’re sure you can use the card responsibly.

In order to lessen the risk of an expensive overdraft, Mael recommended that you “partner this with deducting the purchase from checking as it’s made. That way, when the payment comes out, the money has already been deducted from the checking account at the time of purchase!”

Get a secured credit card.

If you can’t get approved for a regular credit card because your score is too low, that doesn’t mean you’re out of options. In order to build your score and practice the basics of responsible credit card use, you could apply for a secured credit card!

“Consider a secured credit card that’s backed up a savings account you can’t access while the card is open,” said Luken. “If your financial situation becomes rocky, you can contact the issuing bank and have them close the card and pay it off with the money that’s secured in the savings account.”

Plans are easy. It’s sticking to them that’s hard.

As Mael noted to us, many of these steps are pretty simple. But that doesn’t mean they’re easy. “They do take a commitment and a dedication to making them work,” she said.

“The key is to have a plan and stick to that plan. Credit is sexy and easy and lets you get the ‘stuff’ that you want. It can be a real trap that once you’re in it is hard to get out.”

Racking up credit card debt and tanking your credit score could leave you hard-up during a financial emergency. So use your cards responsibly! To read more about setting yourself up for financial success, check out these related posts and articles from OppLoans:

What other questions do you have about credit cards? Let us know! You can find us on Facebook and Twitter.

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Jacob Dayan is the CEO and Co-Founder of Community Tax, LLC (@communitytaxllc) and Finance Pal, LLC. He began his career in Wall Street New York at Bear Stearns working in the Financial Analytics and Structured Transactions group. He continued to work in Wall Street until early 2009. When he then left New York and returned to Chicago to be with his family and pursue his lifelong dream of self-employment. There he co-founded Community Tax, LLC followed by Finance Pal in late 2018.
Roslyn Lash (@RosLash) is an Accredited Financial Counselor and the Author of The 7 Fruits of Budgeting. She specializes in financial education, adult coaching, and works virtually with adults helping them to navigate through their personal finances i.e. budgeting, debt, and credit repair. Roslyn is a real estate broker and is also the founder of Youth Smart Financial Education Services which specializes in financial literacy. Her advice has been featured in national publications such as USA Today, Forbes, TIME, Huffington Post, Los Angeles Times, and a host of other media outlets.
Christine Luken, The Financial Lifeguard (@FinLifeGrd), is a money coach, speaker, and author of two books: Money is Emotional: Prevent Your Heart From Hijacking Your Wallet and Manage Money Like a Boss: A Financial Guide for Creative Entrepreneurs.
Laura Mael has been working in the financial industry for over 30 years. Currently, she is responsible for sharing the story and expertise of Settlers Bank (@settlersbankwi) where she serves as Public Relations Officer. Also, she is an entrepreneur and owns, Career Solutions by Laura.  Active in her community she recently served as ambassador for the Women’s Entrepreneurship Day in Madison, WI. She holds her BA in Sociology from the University of Wisconsin Madison and is a certified Global Career Development Facilitator.
Evan Sutherland is a Veterinary school dropout turned entrepreneur. In late 2017, he and his wife co-founded (@BudgetingCoupl) to teach one simple truth: spending money correctly is the secret to building savings, becoming debt free, and enjoying money. He and his wife live in Washington State with their cat and pup.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.