When it comes to using a credit card, its not always be clear how to use it to your advantage. We look at how often you should be using your plastic, in order to boost your creditworthiness.
Can I use my credit card for daily spending?
Generally, it depends on what kind of credit card you’re using. Some cards are more suitable for use every day and others are best to use every now and then. Whatever you use your card for however, it’s important to always be sure you can pay it off on time.
Cards you can use for daily spending
A rewards credit card is ideal for use on a daily basis. For example, you could use this card for your weekly food shop, getting petrol or paying your bills with it. You would be making these purchases anyway, so why not build your score and collect some benefits along the way.
Credit Builder Card
If you have a credit builder card, you could also use this as part of your daily spending. These types of cards help to build your credit score, but this will only work if you make your repayments on time and stay within your credit limit as well. You can check your Equifax report for free with CredAbility.
What cards shouldn’t I use for daily spending?
Purchase Credit Cards
These cards are better for spreading the cost of a large purchase over a long period of time. You don’t need to use a purchase card as often as daily, but it’s advisable to use it at least once a month to ensure you’re increasing your creditworthiness.
Money Transfer Card
This type of card is slightly different to a standard card and isn’t usually used for daily spending. These types of cards are designed to allow you to transfer money into your bank account. So this is more useful for someone who needs to borrow some cash but doesn’t want to take out a loan.
What happens if I don’t use my credit card?
If you have a credit card that you’re not using because you feel like you don’t need it, you could cancel it. This will reduce the risk of any fraud on your account.
However, one thing to be aware of is that cancelling your credit card could harm your credit utilization. Credit utilization is the amount of credit that’s available to you. So if you cancel a credit card, your credit limit may decrease. After this, any credit you do use after this would take you closer to your limit. It’s generally advisable to stay within 30% of your credit limit. Harming your credit utilization can have a negative effect on your credit score.
Also, by not using your credit card you could be missing out on the opportunity to build on your credit score and lose out on any rewards that are on offer.
If you don’t use your credit card for an especially long period, i.e. 12 months or more, then the lender may decide to cancel the card for you due to inactivity.
A few things to remember...
When it comes to using a credit card, spending small amounts and repaying on time, as well as staying within your credit limit can have a positive impact on your credit score.