Benefits of responsible credit card usage

Quick insights

• Credit cards can help improve your credit score and overall financial well-being when used responsibly.
• Beyond their role in building and potentially improving your credit, credit cards can help with budgeting, debt consolidation, financial discipline, earning rewards for everyday purchases and more.
• The Chase Freedom Rise card can be a strong choice for a first credit card, as it has many features geared toward helping you achieve your financial goals.

How credit cards can be part of your financial planning

Credit cards can help with short- and long-term financial planning, needs and goals—here are a few ways they can be of use:

• Building credit history: Regular and responsible use of a credit card can help build a strong credit history, which is crucial for future financial endeavors like getting a mortgage or car loan.
• Budgeting: Credit cards may be used as a budgeting tool, helping you track your spending and identify areas where you can save.
• Emergency fund: A credit card can serve as an emergency fund, providing a safety net for unexpected expenses.
• Rewards: Many credit cards offer rewards programs that come in the form of points or cash back. You may be able to redeem these points towards travel-related purhcases.

Achieving financial goals with a credit card

Using a credit card may actually make it easier to achieve your financial goals in the following ways:

• Debt consolidation: Some credit cards offer low- or 0% introductory APR balance transfer options that can help consolidate debt and reduce interest payments.
• Improving credit score: Regular and responsible use of a credit card can improve your credit score, which can lead to better loan terms and interest rates in the future.
• Building financial discipline: Using a credit card responsibly can help build financial discipline, a crucial skill for achieving long-term financial goals.

Leveraging bonuses to improve your financial situation

Credit card rewards can be a useful tool in your financial planning arsenal. Here are a few tips on how to strategically use credit card rewards for financial gain:

• Understand the bonus structure: Different credit cards offer different bonuses. Understanding these can help you maximize your benefits. For example, some credit cards offer rotating bonus categories, which can be maximized through strategic spending during the bonus month(s), while other cards offer set rewards in certain bonus categories. If you have a rotating bonus category that offers 5x points at grocery stores and another card that always offers 5x points at gas stations, it makes sense to use those cards for grocery and fuel purchases, respectively.
• Spend strategically: Use your credit card for regular purchases to earn rewards, but always pay off the balance in full each month to avoid interest charges. You likely won’t earn rewards when spending with a debit card or cash.
• Redeem rewards strategically: Make sure to understand which rewards give you the most value—some rewards may have a lower redemption value than others. While some options may provide greater worth, you’ll still want to make sure your rewards redemption best aligns with your goals.   
• Bonus tracking: Keep track of your bonuses and plan how to use them to achieve your financial goals.

Improving your credit score with responsible credit card usage

Your credit score is calculated using a number of factors, many of which can be aided through responsible credit card usage.

• Regular payments: A strong history of on-time credit card payments is one of the most effective ways to improve your credit score. It also prevents late fees, and if your on-time payment covers your entire balance, it typically eliminates interest charges as well.
• Keeping a low balance: There are a few benefits to a low balance, including a decreased likelihood of spiraling debt and interest charges. Another benefit of a low balance is the positive impact on your credit utilization ratio, or the amount you owe compared to your credit limit. It’s generally recommended to keep your credit utilization ratio below 30% to avoid any negative impact on your credit score, although a ratio of 20% or lower is considered ideal.
• Long-term usage: The length of your credit history is one of the largest factors in determining your credit score. Keeping your credit card(s) open and active for a long time can be beneficial, as your credit history is determined by the average age of all credit card accounts.
• Diversification: Having a mix of different types of credit, like credit cards and loans, can positively impact your credit score. Installment credit includes loans with fixed payments and a set end date, such as auto loans, mortgages, and student loans. In contrast, revolving credit involves variable payments with no set end date, exemplified by credit cards and lines of credit. When considering credit card diversification, it is important to first review your current credit card inventory to confirm whether a new credit card is right for you.

How Chase Freedom Rise^® can support responsible credit card usage

The Chase Freedom Rise^® card offers a number of benefits that can help support responsible credit card usage.

• Cash back on purchases: With 1.5% cash back on every purchase, you can earn rewards just for using your card on purchases you were already planning on making.
• No prior credit history required: Chase Freedom Rise is accessible to those who are new to credit, helping you start your credit journey on the right foot.
• 24/7 customer service: Chase's customer service is always available to help with any questions or issues.
• Fraud protection: You won't be held responsible for unauthorized charges, providing an extra layer of security.

Bottom line

Responsible credit card usage offers numerous benefits that can contribute to long-term financial success. Regular and timely payments can help build a strong credit history and credit score, which are both helpful when applying for future credit cards, loans or mortgages.

Using a credit card as a budgeting tool can also enhance financial discipline, helping you track spending and identify saving opportunities. Credit card bonuses and rewards can lead to additional savings, and they help you maximize your spending by earning cash back or rewards points on everyday purchases.

When chosen carefully and used responsibly, a credit card can be one of the most important tools on your financial belt.