How to Be Smart While Using Your Credit Card

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The holidays are behind us, and now our house is filled will all the purchases…the flat-screen TV, the latest video game system, and new phones…

…all charged on the credit card. That means that the new year has the potential to bring a lot of new debt. But it does not have to!

A credit card is pretty much a necessity for military families – you need one for things like renting a car and reserving a hotel room and, sometimes, to cover emergency expenses.

The holidays, especially, are a time when credit cards come in handy. They are convenient, easy to use and can provide a layer of security against fraudulent charges and identity theft.

So how can Santa and his helpers avoid a post-holiday credit hangover, and increase their financial strength at the same time?

Here are 10 tips for using credit cards wisely, at the holidays and year-round:

1. 1. Understand credit card basics. A credit card is essentially a continuous loan (known as revolving credit), good for up to the maximum amount on your card. With that loan comes the expectation that you’ll pay it back. If you don’t, interest accrues.

1. 1. Choose a card that’s right for you. There are endless options, and some of it will depend on your particular credit score and what you qualify for. Military families will want to look for a credit card that has 24-hour phone support while traveling or overseas. You’ll also want protection against identity theft, and a financial institution that closely monitors potential fraudulent charges and alerts you to them ASAP. It’s best to prioritize a low APR card over rewards if you plan to regularly carry a balance. Those who are getting a first card should be careful to use it responsibly. There are also cards that give you “rewards,” like cash back on all purchases, and even more on specific things like restaurants or gas. Others give you airline miles or hotel points. You’ll have to weigh what’s best for your needs and financial situation. Also be realistic about what you can afford.

1. 1. Credit cards aren’t free. Interest rates vary widely, with credit unions often having lower rates than other financial institution. Some cards, especially those with generous points programs, charge an annual fee.

1. 1. Read the fine print. It’s so important to understand interest rates, fees, benefits, and other terms of the card before applying.

1. 1. Anyone can apply for a credit card. In most cases you can apply online with basic information such as your income, and the income of any co-applicants. Understand that a co-applicant’s credit rating is taken into consideration during the application process.

1. 1. Not everyone who applies is approved for a credit card. The first thing to do if you are rejected is to ask the financial institution why. If the reason is credit score or other financial issues, it might be helpful to consult a personal financial counselor or a credit counselor.

1. 1. Those who don’t have a strong credit history should consider applying for a secured card. The card requires a deposit, but can help you learn how to manage your credit and build your credit score to the point where you can apply for a non-secured credit card.

1. 1. Keep track of your usage, and check your bill regularly. Notify your financial institution immediately of any suspicious charges. Online banking and mobile apps make this easy to do, even when in the midst of a deployment or PCS move.

1. 1. Give yourself a maximum credit-card spending amount each month, regardless of what your card limit is. This should be an amount that you can easily pay off.

1. Credit cards can actually improve your financial health. The longer you have a card and pay it off on time, the more your credit score is likely to rise. Charging some of your expenses every month and paying them off right away – before any interest accrues – is one of the quickest and easiest ways to build a solid credit history that will help you secure auto loans, a mortgage and other lines of credit. Good credit history can also help you get a job, rent a home and even impact a military security clearance.

Navy Federal is federally insured by NCUA.