How to Use Credit Cards Like a Smart Person


Getting Out of Debt Managing Your Money

I like to consider myself a smart person. On paper I look pretty good- B.A from a good school, experience in several different industries ranging from education to nonprofits to food service, some accolades from college.

Perhaps I flatter myself, but you might think, “Hey. That girl seems smart. She probably knows how to use credit cards.” And you would be right…but it came at a cost. $1,200 to be exact.

Credit cards are a big pitfall for many Americans. The average American household carries $15,950 in credit card debt, according to CNN Money. Since credit cards tend to have the highest interest rates around, this debt costs people hundreds or even thousands of dollars in interest each year. Yikes. That’s a lot of money!

How I Racked Up Credit Card Debt

The summer before my senior year of college, I got an internship in Washington D.C. It paid a very small stipend each month, and I was so excited to spend the summer in our nation’s capital. I was 22 and ready to take over the world!

To be fair, it was an amazing time. I met incredible people, familiarized myself with D.C., and saw a whole new world open up before my eyes. I really grew as a person that summer.

I was, however, completely unprepared financially for the realities of living in a city on $500 a month. I had no savings and my family was unable to help pay for my living expenses. I jumped in anyway – I had a credit card. 

I found a very cheap and very small room for $500 a month and spent my stipend on that. Literally everything else I put on my credit card. All my food, my transportation, my entertainment- it all went on my card.

Of course, I tried to be frugal by walking to work and visiting free events and museums around town as much as possible, but one cannot survive on free forever. In the course of two and a half months, I racked up $1,200 in credit card debt, and had to return to my $8.50 per hour campus job in the fall to try and pay it off. #disaster

You don’t have to be like me! There is a method to using credit cards like a smart person. I picked up two other jobs when I got back to campus, and after I spent the entire fall working like a madwoman to pay off that debt, I vowed never to let it happen again. Here’s how I do it.

How to Use Credit Cards Like a Smart Person

Have a clear picture of why you’re using your credit cards. Are you trying to score rewards points? Are you using it because your debit card won’t suffice?

If you’re digging yourself into more debt each month because you use your card to get by, stop now! Just put it in a dark drawer and walk away (or freeze your card in a block of ice – seriously!). I promise this is the best thing you can do for yourself.

Examine your finances and find ways to cut your spending everywhere and anywhere so that you can get out of debt and not rely on credit cards.

If you’re using it for rewards points, pick one or two categories to use it for. Then ONLY use it for those. I use mine for gas and groceries. That’s it. No more, no less. If I want to buy something randomly, I use my debit card. If I want to make a large purchase, I use my debit card. That way, I know I have enough money to pay here and now and I keep myself from going into debt.

Pay on time every month. Don’t carry a balance on your credit cards. You’ll be charged interest. That costs even more money and hurts you in the long run. Paying on time every month also helps your credit score, as it shows lenders you’re a responsible consumer.

Don’t use more than 30% of your available credit. Just because you have a $7,000 limit doesn’t mean you need to spend that every month. You want to be able to pay off your bill each month, so keep your spending at a level where that’s attainable. Your percentage may vary a little bit, but if you keep it between 20%-35%, you should be able to make payments every month and avoid credit card debt.

Have you ever been in credit card debt? What got you there? How do you use credit cards now?

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