How to Use Credit Cards to Your Advantage

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Your credit card has the potential to be the hardest-working financial tool you have in your wallet. But, you’ll need to make a few key decisions, give it a bit of guidance, and make sure it’s working as hard as inhumanly possible for you.

In fact, a good credit card can add hundreds of dollars to your annual budget through rewards, perks, and bonuses if you use it strategically. But, if you’re not responsible, it can cost you hundreds or thousands in interest charges.

So here’s a primer to using your credit card to your advantage. Once you’ve got these decisions handled, you’ll be on your way to choosing a credit card that makes your life – and your budget much easier.

Choose a card that fits your spending

One of the best ways to make your credit card earn its keep is to choose one that aligns well with your spending. That doesn’t just mean how much you spend, where you spend your money also matters when it comes to credit cards.

If your biggest monthly budget item is your grocery bill, it makes sense to look for a card that offers rewards on grocery spending. Store branded credit cards can be quite lucrative, but don’t ignore cash-back cards that offer multipliers for any grocery spending you make.

On the other hand, if you foresee a lot of furniture or travel spending in your future, it would make sense to go for a card that gives you flexible reward categories.

Before you commit to a rewards program, make sure to take a look at what those points can actually score you. There are so many options out there, from pure cash-back all the way to travel rewards and even earning your way towards a new car.

Know your weaknesses when it comes to rewards

Listen, the quickest way to devalue your rewards is by spending way more than you otherwise would have, just to earn points.

Matters get even worse if you can no longer pay off your balance in full and start accruing interest. Credit cards have an average interest rate of 19.99%, there is no way rewards are ever worth paying that much of a premium

There have been multiple studies that show we’re more likely to spend more to earn rewards. Make sure you don’t get lured into overspending by your rewards card!

The best reward card may be a lower interest rate

While sure, carrying a balance on a credit card isn’t a good forever strategy, that’s not helpful advice if you’ve already got a balance you’re looking to pay off ASAP.

When you’re picking a card – or managing your current cards – make sure you know how important interest rates are for your situation.

If you were to apply for a credit card that offers 0% interest for 12 months as a signup bonus, you could save a ton of money. Let’s say you’re currently carrying a balance of $10,000 at a rate of 19.99% and decided to balance transfer to that low-interest credit card. You would save $2,000 in interest over those 12 months! That’s better than any rewards you could have earned with another card.

Keep in mind that sometimes there a balance transfer fee, but you’ll still end up on top. Knowing your interest rates can make all the difference in terms of saving more money and getting the most out of your card.

Keep your credit limit within reason

Just because you can get a $20,000 credit limit on your new card doesn’t mean it’s always a good idea.

Before you accept a credit limit, ask yourself how much credit you really need and how much you trust yourself to manage it well.

To figure out how much credit you need, think about the monthly spending you’ll be doing on the card. If the goal is to pay it off every month (which should always be the goal), then 1-2x that monthly spending number is a great place to start. Keep in mind you might need some padding for occasional larger purchases.

Anything more than that may make it easier to end up carrying a balance by “putting it on your credit card,” which is when your credit card stops being such a great deal. If you’re instantly approved for more than you need, you could always request the lender to reduce your limit.

Take advantage of bonus offers

Sign-up bonuses and rewards can be a lucrative way to make the most of your credit cards, especially if you’re choosing a new credit card.

From earning 60,000 points with the American Express Platinum Card, to earning higher multipliers on ALL your purchases for 6 months with certain cash-back cards, those bonuses can help you fund everything from a month of gas, to a round of groceries, to your next vacation.

Before you dive in head first, make sure to check the fine print on that bonus offer:

It’s only a good deal if you can easily meet the requirements, which could include spending thousands in the first 30 or 90 days.

Pro tip: If you’re having a hard time meeting that minimum spend threshold – try buying gift cards in advance to stores you regularly shop at anyway (think groceries and gas). Buy the card now, meet the minimum spend now, and shop for your gas and groceries later.

Understand Your Credit Card Perks

You know what’s silly? Paying for something you already have.

Many credit cards these days come with a range of perks, from extended purchase protection and warranties, to travel insurance and trip cancellation policies baked right in.

These bonuses are things that you might be tempted to buy elsewhere, but before you do, make sure to read the insurance certificate and benefits booklet that comes with your credit card.

There’s no reason to buy an extended warranty on your phone if your credit card has you covered for two years anyways, or to pony up for pricey rental car insurance if your card has your back (and yes, those are both perks your card might have!)

Sure, you’ll need to understand the details of the policies, but once you do, you could save huge amounts on expensive extras you already have.

Final thoughts

To make sure your credit card is working for you and not against you, make sure you know:

  • your spending
  • your needs
  • what kind of rewards you like
  • how you handle credit before you choose a card

With that in mind, use a credit card comparison tool so you don’t have to research hundreds of cards. Once you’ve got the right card in your wallet, you can start earning rewards that benefit you.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Miguel (The Rich Miser) on August 28, 2017 at 1:45 AM

    Solid tips. I have saved thousands on travel by using rewards credit cards responsibly, including hundreds saved by the car rental insurance benefits.

    Like you said, a good way to meet the minimum spend for a sign-up bonus is with gift cards. I like Amazon’s, since I know I’ll spend the money for sure.

    • Barry Choi on August 28, 2017 at 7:17 AM


      Credit cards can be such a useful tool, I’m surprised more people don’t use them effectively.

  2. Investocrat on September 24, 2017 at 3:29 PM

    Great advice and thanks for sharing! I definitely like taking advantage of and maximizing credit card rewards whenever I can. Thanks for the credit card comparison link as well!

  3. […] must reads include: How to Use Credit Cards to Your Advantage and Best Travel Credit Cards in […]

  4. Nancy Tan on December 14, 2019 at 5:54 AM

    All the advices that people needs to know are in this column!

  5. Gary J on February 7, 2022 at 3:26 PM

    How can you take advantage of new reward cards if you already have credit cards and excellent credit. Is there anyway to do this without getting dinged when the new credit card checks your credit? I don’t see anyway to do this. I don’t need a new card; I’d like to take advantage of a card that has rewards and some of my cards are 12, 20 and one that is 43 years old. Getting dinged is not worth the $50 or so in reward points. How do I do this?

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