Signs you're using the wrong credit card

There's no such thing as a universal best credit card. The right card for you depends on your lifestyle, your goals and your credit history. For instance, if you're looking for travel rewards but your friend is building credit, the best card for each of you will differ greatly.

And while there may not be one best card for you — the average American has about three cards, according to a 2021 Experian study — there are many times a card can be wrong for a specific situation.

Here are signs you could be using the wrong credit card, and what you can do instead.

You’re still using your starter credit card

You may have started out by building your credit with a secured card, student card or alternative card, but once your credit is in better shape, it may be time to upgrade.

If you’ve used a starter card responsibly by keeping your utilization rate low and paying balances in full every month, you may qualify for a card that's a better fit now. A different card could offer a higher credit limit, better rewards earnings, and perks like cell phone protection and travel benefits.

You’re not using a card enough to earn the sign-up bonus

New cardholders can often earn a lucrative welcome bonus, but usually with a caveat: You have to spend a minimum amount within a specific time frame to get it.

A little planning can help. Think about any upcoming big purchases you need to make, such as a car repair or a new laptop. Just one of those could be enough to hit the bonus’s spending requirements.

You’re using a store-specific card

It’s true a store credit card can save you money, especially if you are a frequent, heavy spender at that store. However, the rewards earned with a store credit card are often only redeemable at that store, limiting their usefulness.

Most shoppers would be better off using a general rewards credit card and earning more flexible rewards. Some cards have elevated rates for online shopping purchases while others earn as much as 5% back at popular merchants like Target, Walmart and Amazon.

You didn’t realize 5% cards take extra work

Several cards boast a top 5% cash-back rate in popular spending categories like grocery stores, restaurants and gas. The catch, though, is that you'll have to do some work to earn that rate. In most cases, you'll need to track categories: Qualifying 5% purchases may rotate quarterly, or you may have to choose your own categories.

You’re regularly using a balance transfer card for purchases

Balance transfer cards can be excellent tools for paying off debt. They consolidate several debts into one place, making them easier to keep up with, and they can give you a breather on interest for many months. However, if you’re using a balance transfer card for everyday expenses too, it will be hard to whittle that balance down to $0. Plus, many balance transfer cards don’t come with rewards.

You aren’t using the right card for that purchase

It pays to know the rewards rates for all of your credit cards. Say you have two credit cards, one that earns 4% on gas and another that earns only 1%. Using the 4% card whenever you fill up would return $30 more if you spent $1,000 annually on gas. That $30 may not seem like a lot, but small amounts add up, especially if you have multiple rewards credit cards. To help keep track of different rewards rates, you could label your cards with sticky notes or keep a small reference guide in your wallet.