Credit card debt can be one of the worst things in the world to tackle. In 2008 I racked up over $5,000 in credit card debt after graduating college. In 2011 I paid off that debt but it was after years of struggling and paying huge amounts of interest!
After I shed the credit card debt I vowed to learn how to use credit cards responsibly. While I’m a fan of Dave Ramsey’s teachings, I wanted to still get the great benefits credit cards offer, but not get in over my head again. I wanted the perks without the debt. I wanted to get free travel like my Alaska cruise vacation just for using credit cards for my normal purchases.
After reading books and listening to many personal finance gurus for a while I picked up a lot of tips to help me use my credit cards in a responsible way.
How To Use Credit Cards Responsibly
Today I want to share those tips with you all so that you may also get the great benefits of credit card use without the stress and debt. It is possible to use credit cards smartly and responsibly.
Know that it’s not “just a piece of plastic”
If you want to use a credit card responsibly and not get yourself into trouble then you need to realize that the credit card has a great financial emotion behind it. If you abuse it, it can ruin your life. If you overspend, it can come back to bite you. You have to do whatever it takes to mentally realize your credit card is your money, your bank account, your savings.
Learn how to track your spending
Using a credit card means you won’t be running out of cash at the register, but it doesn’t give you the freedom to spend freely. To use credit cards responsibly you still need to track your spending. You can do this in a variety of ways either online through a service like Mint.com or with pencil and paper. Either way, to use a credit card well you need to track your spending and know how much you’ve charged onto your card already.
Pay off your credit cards in full each month
If you build up a balance and start paying interest you can negate all the rewards you get from using credit cards. You should always know what you balance is and have the money to pay it off at the end of the month. If it helps you can also adopt the weekly approach and pay off your credit card balance at the end of every week.
Avoid increased convenience spending
Many personal finance gurus like Dave Ramsey speak out about credit cards because the convenience factor leads to overspending. This can easily happen so you need to stay vigilant. Acknowledge that there are factors that lead to overspending and then use techniques to keep yourself from spending too much. Some ways to do this are updating a budget, keeping a list of your goals in your wallet, having a wait a day buy rule, or other techniques.
Monitor multiple accounts carefully
Once you fall into the wonderful world of credit card rewards you’ll find you want multiple credit cards to maximize your rewards at various locations. This can work well but to do it responsibly you need to watch you accounts like a hawk. They can easily get away from you if you are not careful. Create a system that guarantees you will never miss a payment.
Have a small limit on your credit card(s)
One way to be responsible with your credit card use is to keep a small limit on your card rather than increasing your credit limit every chance you get. If you keep the limit small to an amount you know you can pay then you’ll never worry about making that payment at the end of the month. You’ll still get credit card use benefits but have limits that keep you more in control.
Get a good credit card
By this I mean get a credit card that is worth using for good perks. You want to make sure your credit card gives you all the benefits you care about most so that using the credit card is worth it. You might care about airline miles or cash back rewards or another benefit. Whatever it is, make sure you select a card that fulfills your desires.
If you do all these things and are smart about your credit card usage it doesn’t have to be a trap. You don’t have to ever pay interest on your credit cards to get all the benefits they offer.
I’ve paid off my credit card every month since getting out of credit card debt back in 2011. In that time I’ve earned thousands of dollars worth of rewards in cash back and hotel stays.
In fact, I’ve got two free flights on Southwest just waiting for me to plan my next trip thanks to my credit card usage! It’s a wonderful thing and I’ve truly loved finding ways to travel for free thanks to using credit cards responsibly.