8 Credit Card Dos and Don'ts in 2023

If you're not sure how to best use your credit cards, here are some tips.

Credit cards are a textbook example of the phrase "your mileage may vary." Some people are going to save thousands of dollars in 2023, thanks to their credit cards. Others are going to pay thousands of dollars in interest charges and other credit card fees. Most would probably prefer to be in that first group, and you can be if you follow these guidelines.

1. Do: Pay down credit card balances

The main way credit cards cost you money is interest. If you carry a balance from month to month, the card issuer can charge you interest based on your card's APR. And since credit card APRs just hit a record high, 2023 is going to be an especially costly time to carry a balance.

If possible, set a goal to pay your credit card balance in full every month. That way, you can avoid interest charges entirely. If you're currently carrying balances on any of your cards, make getting out of credit card debt a priority. The more you pay down those balances, the less they'll cost you.

2. Don't: Overspend on unnecessary expenses

One of the reasons credit cards can be dangerous is how easy they make it to spend money. They often have high credit limits, and you don't need to pay back purchases right away, so it's tempting to spend more than usual.

To avoid this, make a monthly spending plan where you figure out how much of your income you'll use for each of the following:

• Necessities
• Investments/retirement
• Savings goals
• Fun money

By deciding how much you can spend on everything ahead of time, you get rid of any guesswork. This helps you avoid a credit card bill you can't pay back later.

3. Do: Make sure you're using the right type of credit card

There are many types of credit cards to choose from. To get the most value, you need a card that matches your financial situation and needs.

For example, if you don't have any credit card debt and you can afford to pay your bill in full every month, then rewards credit cards are a great choice. These earn rewards, such as cash back or travel points, on your purchases.

On the other hand, if you have credit card debt, then a rewards card wouldn't be the best choice. Instead, you'd be better off looking at balance transfer cards with a 0% intro APR. This type of card allows you to refinance your debt and save on interest charges.

LEARN MORE: Credit Card Types: Which Fits Your Needs?

4. Don't: Open new credit cards on a whim

It's usually quick and easy to open a credit card. You could fill out an application online in minutes for a card that catches your eye. You might also get an offer to open a store credit card while checking out, or an airline credit card while on a flight.

That doesn't mean it's a good idea to rush into new credit cards. You may end up with a card that isn't actually a fit for your lifestyle. If you open too many credit cards, it could also potentially affect your credit score. Before you apply for a card, do some research and compare card options to ensure it's right for you.

5. Do: Get a valuable intro offer

Intro offers are special deals available to new cardholders. Since they're designed to entice consumers to apply, they're often the best deals a card issuer has. Considering how valuable these offers can be, it's worth getting at least one in 2023.

Two of the most common types of intro offers are sign-up bonuses and 0% intro APR offers. Sign-up bonuses allow you to earn a big chunk of credit card rewards if you spend enough money with your new card. A 0% intro APR means you can pay no interest on purchases and/or balance transfers for the entire intro period. It works well if you need to carry a card balance and want to avoid interest charges.

6. Don't: Pay unnecessary fees

When it comes to credit card fees, the only one to consider paying is an annual fee. Credit cards with annual fees typically offer more benefits, so you can come out ahead. However, always make sure the card is saving you more money than you're paying for it.

Other than that, aim to avoid fees. Pay on time so you don't incur any late payment fees. Get at least one credit card with no foreign transaction fees so you don't pay extra if you travel abroad or buy something online from an international merchant.

7. Do: Set up auto-pay

Most credit card companies offer an auto-pay feature to have your payments automatically taken from your bank account. I highly recommend using this so there's no risk of missing a payment. You'll avoid late fees this way, and paying on time is good for your credit score.

8. Don't: Use more than 30% of your credit limit

If you have a solid credit history, you might be surprised at the kind of credit limits you can qualify for. Remember that you're under no obligation to use all that credit, and in fact, it's better if you don't. Most experts recommend keeping your card balances below 30% of their credit limits. So, if your card has a $10,000 limit, keep the balance below $3,000 at all times.

The reason is because your credit utilization ratio, the ratio of your card balances to their credit limits, has a big impact on your credit score. In addition, by not charging too much, you're at less risk of going into credit card debt.

Credit cards can be one of your most valuable financial products. Stick to these guidelines, and you'll get more out of your cards in 2023.