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Credit is often considered negative; however, most of us need to use credit at some point in our lives–to purchase a home, finance a college education, or buy a car. Not all credit is created equal, and it’s important that you use credit, especially credit cards, wisely, to ensure that you won’t find yourself in debt beyond your means. Credit cards essentially offer a high-interest loan for you to purchase just about any item you want within your credit limit, and there are some steps you can follow to make sure you don’t get into credit card debt.

Understand how credit cards work

Credit cards offer consumers the ability to conveniently purchase items without paying for them immediately. This can definitely work in your benefit if you pay the card off monthly, because you are essentially using the bank’s money interest-fee for up to a month (depending on your grace period). You also get a variety of other benefits, which can include a record of all of your purchases, reward points, consumer protection, and convenience.

But, fail to pay off your entire balance in one month, and you’ll quickly notice the benefits fade away. Generally, if you carry a balance, your grace period disappears and you’ll find yourself paying interest on your purchases starting on the day you make them. Interest compounds (i.e., you’ll pay interest on interest owed) on credit cards, so before you know it, you could owe more interest than principal.  

Using restraint in using credit cards 

If you want to use credit cards wisely, only make purchases that you know you can afford. You should have enough money in the bank to pay off the purchase when the bill becomes due. Tempting as it is to buy the things you want now hoping that you’ll have enough money in the future to pay them off, living on credit is an expensive, and uncertain, habit to get into. In fact, you may find that you’ve paid the bank more money in interest than the item actually cost!

In addition, to avoid late fees or interest fees, make sure you pay off the card well before the due date. Using your bank’s Web site to pay your bill will help ensure your payment is received on time. 

If you find yourself unable to restrain from reckless spending or unable to make payments on time, consider using a debit card that’s linked to your checking account. By using a debit card, you’ll still have a record of your purchases but won’t pay interest or late fees.