6 Smart Ways to Use Credit Cards

January 7, 2019

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When I first started my personal finance journey back in 2013, I was pretty anti-credit card. Credit cards had gotten me in trouble because I didn’t use them wisely and I wasn’t sure if I’d ever trust myself to use them for much of anything again.

Fast forward a few years later and now I use my credit cards for almost all of my shopping and expenses.

I use them for groceries, utilities, business expenses, and more.

I no longer think credit cards are evil, despite what some may say and what I used to think. In fact, when used correctly, credit cards can be a great financial tool.

Smart Ways to Use Credit Cards

Think you have what it takes to use credit cards wisely? Here are 6 smart ways to use credit cards.

1. To “Save” by Earning Cash Back

Credit cards can be a great tool to help you save money. If you are using credit cards to earn cash back, which is essentially saving you money on your purchases, you still have to take care not to purchase things you don’t need.

If you can use cash back credit cards to solely buy things you do need while avoiding overspending, you will be saving money.

Most people get in trouble with this one when they:

  • Buy things they don’t need to earn more cash back. They think they are saving money, but they aren’t because they’ve just bought a bunch of stuff they don’t need.
  • Transfer their cash back into their checking account and use it as “extra” money to buy more things they don’t need. Then they end up paying full price for the things they charged on their credit card.
  • Can’t pay off their balance and end up paying interest on their purchases. This will very quickly outweigh the amount of cash back received.

In order to use credit cards to earn cash back and save money, you have to be extremely disciplined with your spending and paying off your credit card balance in full and on time every single month.

If you decide to use a credit card to earn cash back, I suggest looking for one that offers cash back on all purchases, not just purchases in some categories or at specific retailers.

One good example of a card that offers unlimited 1.5% cash back on all purchases is the PenFed Power Cash Rewards card. You can even increase that to 2% cash back if you’re a PenFed Honors Advantage member! Plus, this card has no annual fee. #winning

2. To Earn Other Rewards You’ll Use

Another smart way to use credit cards is to earn other rewards besides cash back. For example, some people use credit cards in order to earn travel rewards.

I absolutely do not have a problem with this as long as they are not making the same mistakes I already listed above, and they plan to use their rewards rather than letting them go to waste.

Unfortunately, I’ve heard of people I know earning travel rewards only to let them expire by not using them. If you are not planning a specific trip or if you are not a frequent traveler, you would probably be better off with a cash back rewards card or to choose some other benefit instead of travel rewards.

3. To Earn Sign-On Bonuses

You’ve probably received credit card offers in the mail that offer you extra rewards for opening a new credit card. It may be an extra cash back reward if you spend a certain amount in the first few months, such as the $100 statement credit you can get with the PenFed Power Cash Rewards card if you spend $1,500 in the first 90 days, or it may be extra miles on travel rewards cards.

Either way, if you sign up for a new card, you may be able to earn sign-on bonuses. Again, just make sure you’re not buying things you don’t need and can’t afford in order to hit spending limits to get the bonus.

4. For Protection Benefits

In addition to the rewards you can earn with credit cards, you may also have enhanced protection benefits if you use a credit card for your purchases.

For example, many credit cards allow you to dispute charges easily online with the click of just a few buttons and you’ll immediately receive a credit for the charge.

Other credit cards may have rental car insurance for collision damage so you don’t have to over-pay for car insurance at the rental agency. Just make sure you find out if your card offers this benefit before you opt-out of other types of insurance for your rental car.

5. To Build Credit

Credit cards are a tool that can help you build a stronger credit history and improve your credit score. A strong history and score will be helpful for future purchases like a car or a house.

Again, like I’ve mentioned many times before, the key here is to use the card smartly by paying for things you’d be buying anyway and then paying the bill on time and in full.

6. To Smartly Finance a Project

Ok, stay with me on this one because I know it may sound a little questionable at first.

I have warned before about the dangers of financing things with 0% interest promotions on credit cards.

Essentially, many of these cards, especially retail store cards, will charge you interest on your entire purchase from the date you made it if you don’t get your balance paid off in time.

Most other (non-retail) credit cards will only charge you interest on the balance you have remaining on the card beginning the day after the 0% interest promotional period ends.

That said, I still love using 0% interest promotions and offers on retail and non-retail credit cards to smartly finance projects or purchases I need.

The emphasis here is on the word need.

Once again, financing a purchase you don’t need, even at 0% interest, is not the smartest move. But if you need something like dental work, other medical care, repairs or required maintenance on your house or car, etc. and you don’t have the cash in hand for it, 0% interest promotions are a viable option.

I would even go as far as saying that choosing to finance a needed purchase like this at 0% interest, as long as you can pay it off in full at the end of the promotion to avoid interest charges, is a smart alternative to wiping out your emergency fund completely.


Credit cards, if used correctly, can be a great financial tool, and there are smart ways to use credit cards. The key is to make sure you have the self-discipline to use them properly and avoid wasting money.

Have you ever used a credit card in one of these smart ways? Can you think of any other smart ways to use credit cards?

This post is in collaboration with PenFed Credit Union. The views expressed in the article are the views of the author and do not necessarily reflect the views of Pentagon Federal Credit Union. PenFed Credit Union is an Equal Housing Lender and is federally insured by the NCUA.


2 responses to “6 Smart Ways to Use Credit Cards

  1. We kept using our credit cards while paying off debt, but that’s because we had too many unexpected expenses to budget for. So we took our weekly payments and put as much as possible against the credit card debt. Anything unexpected that couldn’t be handled with the main spending went on the card. It worked for us, but that’s because we had guaranteed income (disability and unemployment). Which is why we didn’t bother with an emergency fund. We had so many unexpected expenses (yay chronic conditions) that we’d have constantly been borrowing from it, then taking money away from credit card payments to restock the EF.

    We’re currently using our credit card pretty smartly in that we’re using it for everything, but we’re transferring money out of the weekly budget each time we charge something on the card. I make a weekly payment using those funds.

    And yep, you need to put your savings/extra cash back somewhere safe — otherwise, you’re not really saving it.

    1. It sounds like you guys came up with a good system that works well for you. Everyone will be different, but the bottom line is that there are smart ways to use credit cards to your advantage. 🙂

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