8 Smart Ways to Use Your Credit Cards in a Recession

When the economy takes a dip, the rules of credit can shift. Lenders may tighten standards, interest rates dip, and balances could grow faster than expected. Smart credit card use can be a real stabilizer. With a little planning and awareness, you can avoid common pitfalls, keep your finances steady, and navigate a recession with confidence.

Generally, the smartest credit card strategy is the same in a recession as it is in good times. Do your best to stay out of situations where you’ll have to pay interest or late fees. And it’s also perfectly fine to have a credit card and not use it. 

If you can steer clear of credit card debt and late payments, you’ll easily avoid the worst of credit card pitfalls. That way, you’re free to enjoy your card benefits and rewards. We’ll cover smart ways to use your credit cards that consider your real-life needs.

1. Check Your Credit Card APR and Fees

Your APR and fees add to the cost of your balance, so it’s essential to know the numbers. When you know your fees, you can sidestep surprises, spot cheaper options, and make smarter decisions that keep your debt from growing faster than you expect. Here’s what to check:

• APR. How much interest you’re charged on unpaid balances

• Maintenance fee. What you pay annually to keep the account open

• Late payment fees. Cost of making late payments

• Balance transfer fees. How much you’ll pay to move a balance onto a card 

Credit card APRs are some of the highest among debt products—higher than personal loans, auto loans, and mortgages. Credit cards aren’t meant to be used as long-term debt carriers, because the interest rate quickly snowballs. Interest is compounded daily. 

Take a card with a 22% APR. If you put $10,000 on the card without paying it off, you’d owe a bare minimum of $12,460 by year’s end. But you’d also have late fees, which are added to the balance, and you’d pay interest on those as well. After 12 months, you’d likely owe closer to $13,000 if your card charges $30 a month for late payments. In another year, you’d owe at least $16,000. Interest builds even faster for larger balances.

Look beyond the transaction amount or your credit card balance. The bigger picture could help you understand what you’ll really pay for carrying a balance. For example, you buy a new dishwasher for $500. Financing it on your credit card at 22% over six months will cost you another $44 in interest charges. 

Knowing the fees could help you make informed decisions, plan payments effectively, and minimize unnecessary interest charges. Here are some more tips on using your credit cards strategically: 

• Review card terms and rate disclosures before applying or using a new card to understand potential costs.

• A personal loan might be better than a credit card if you need more time to pay. Rates are typically lower, and fees more reasonable. 

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2. Have a Plan for a 0% APR Credit Card

During a recession, credit card issuers tighten the purse strings. They may lower credit limits, sometimes without notice. They may increase interest rates. It may be harder to find 0% APR introductory offers, and harder to qualify. In the wake of the 2008 crisis, many credit cards significantly cut credit limits.

Pay down credit card balances, ideally before your 0% APR offer expires. You don’t want to be stuck holding the bag when interest kicks in. You might shift your debt from your card to a lower-interest loan via debt consolidation. You could earn a better rate and pay less money overall by switching to fixed monthly payments on a personal loan.

Why personal loans are superior for large balances: Interest rates are lower. Also, personal loans arrive with a built-in schedule and target payoff date. You may prefer the structure to that of a credit card, which only asks you for minimum payments. 

3. Look for Changes to Rewards And Benefits

Check with your credit card issuer for updates to rewards or benefits, which may shift toward essentials like gas or groceries during a recession. That way, you can prioritize using credit cards that give you the best rewards.

4. Carry Debt When You’re Low On Cash

During recessions, prioritize immediate financial needs over debt payoff. You may need your cash to cover expenses like your rent, mortgage, or another emergency expense that you can’t put on credit. In a worst-case scenario, it may be better to pay interest on a credit card than to default on a rent payment and lose access to housing.

This is a short-term, expensive approach, because credit card interest rates are typically quite high. The best way to go into this is to create a repayment plan and scout all your options. It’s possible to get rid of debt when you have a plan and some practical tactics. Some strategies you could consider:

• Set a limit on how much debt you’ll take on.

• Make a bare-bones budget and cut all unnecessary expenses.

• Pay at least the minimum on time.

• Contact your credit issuer to find out about enrolling in a temporary hardship program. 

5. Avoid Canceling Your Cards

Avoid canceling your credit cards during a recession. Keeping the account open but the balance low (or at zero) could help you in two ways. 

One, it gives you a way to handle an emergency expense. Two, it could help you maintain a good credit standing. Part of your credit score is based on your credit card balances versus your credit limits. The more credit you have, the better. 

If you’re paying an annual fee for a credit card, call your issuer and ask them to waive it. They might. If they don’t, ask if they can downgrade the card to a version with no annual fee.

Pro tip: Good reasons to cancel credit cards include overspending. If you use credit card rewards to justify spending on non-essentials, that’s a problem. Keep your credit cards open unless canceling would help you balance the budget. 

6. Prioritize Cash Back Cards

Shift your attention to cash back cards during a recession. Some cash back cards will refund you a percentage of purchases on specific spending categories like gas and groceries. Others offer flat percentages on all purchases. 

Example cash back cards as of November 2025:

Predictable cash back cards could be easier to handle than rotating rewards. Rotating rewards cards may offer bigger discounts, but predictable rewards could be easier to manage. Predictable rewards require less timing, less tracking, and less math. 

Getting 5% cash back on up to $1,500 in combined purchases in bonus categories could be tempting, but it can be a lot to juggle. Predictable awards are consistent—you’ll always get that 3% back on gas, and no mental gymnastics. 

And no unnecessary spending. For example, a card that gives you 2% back on everything means you don’t have to think about buying “limited-time 5% back” nonessentials like streaming services or Amazon candles.

You might use two cards for different expenses: 

• Predictable rewards card for everyday spending

• Rewards card for specific categories 

That way, you always get more than 1% rewards. It also reduces temptation to spend on things you don’t need. If this seems like too much mental calculation, stick to one card. No reward strategy works if you carry a balance. Interest always dwarfs rewards.

7. Look Into an Installment Loan Program

Some credit cards offer installment loans that let you pay for purchases in monthly installments. In exchange, you pay a monthly fee or fixed interest rate. Spreading out purchases may help you pay for essentials you can’t afford at the moment. 

Installment loans cost more than paying down the full balance on a credit card. Loans can be ideal for one-time, essential purchases. 

8. Use a Credit Card for Essentials

Track your spending, create a budget, and do your best to buy only what you need and can afford. If you’re lucky enough to remain employed, recessions can still mean a lot of uncertainty. And excessive credit card debt could hurt your financial goals far into the future.

Some ways to control credit card spending include:

• Track spending: Use a budgeting app to track your spending.

• Budget: Create a budget so you know exactly how much you can spend monthly.

• Use cash sometimes: Leave the credit card at home and spend with cash when you want to limit spending at a specific outing, like a restaurant or a bar.

Moderation is key. Credit cards give you flexibility, but they also encourage spending. No amount of credit card rewards will solve a spending issue—credit cards make it easier to spend more, not harder. If you struggle with overspending, consider ditching the card.

When to Use Your Credit Card vs. Other Payment Methods

Some purchases are more suited for credit cards than others. 

Use credit cards for:

• Better fraud protection on expensive or online purchases

• Rewards on purchases you were going to make anyway

• Short-term needs you can’t cover with an emergency fund or low-interest loan 

• Boosting your credit score with timely repayments

Use debit cards for:

• Budgeting with zero-overdraft checking accounts (you can’t spend more than you have)

• Convenient debt-free spending

Use cash for:

• Limiting spending

• A clear understanding of how much you spend in real time

Credit cards are convenient, prevent fraud, offer rewards, and boost your credit score. When it comes to budgeting and reducing spending, debt cards and cash win the day. 

If you have a spending problem, switching to debit or cash will probably be much more effective than using a credit card with better rewards. Credit cards incentivize you to spend more. Debit cards and cash help you stick to the plan. Consider deleting credit cards from apps or retailer sites where you have your information stored.

How to Negotiate a Lower Interest Rate

Call your credit card issuer. Let them know that you can’t afford to make payments, and you’d like to pay. The issuer will likely enroll you in a hardship program, lowering your rates for a bit. You may be able to negotiate a lower interest rate (potentially 0% APR) while you pay off your debt. The card company will likely freeze or suspend your account while you’re in the program. 

If you’re a long-time customer with a solid payment history, you may qualify for temporary better terms, such as a lower interest rate. Consistent on-time payments demonstrate you’re reliable, and it could strengthen your negotiating power. Issuers sometimes prefer to adjust terms for a loyal customer rather than risk losing the account. 

Options for Managing Credit Card Debt in a Recession

Need help with debt in an unstable economic situation? Here are a few ideas. 

Consider debt relief

Debt relief could unstick you when you’re trapped in deep debt. Freedom Debt Relief offers a free debt evaluation, and we can let you know if you’re a candidate for our debt relief program. Freedom Debt Relief may be the right solution for people who: 

• Are making only minimum payments, which no longer reduces balances

• Can afford a monthly program payment but not full repayment

• Have poor credit, since eligibility depends on affordability, not credit score.

Looking for debt relief in Buffalo, NY or across the country? The first step is the most important one—learn more.

Consider credit card counseling

Credit card counseling could be a helpful strategy for your situation. You work with a trained counselor who can enroll your debts in a debt-management plan (DMP) to help you pay off debts in three to five years. This plan could make it easier to pay back debts, sometimes by reducing interest or shrinking monthly payments. While on the plan, you typically cannot use your credit cards.