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- My dad taught me that a credit card isn’t a supplement to your income—it’s a loan that the issuer expects to be repaid.
- When I got my first card, he told me to make manageable purchases and try not to carry a balance.
- He also warned me to never pay late and to use my credit card responsibly.
After I graduated college, started working, and bought my first home, I decided it was time to get my first credit card. Once I had the card—and its hefty credit limit—in hand, I imagined how I would use that card to finish furnishing my new apartment, buy plane tickets, or cover Sunday brunch.
I was casually chatting with my dad and said I got a credit card. His response was less than thrilled. “A credit card? That’s the fastest way to debt! You have to handle a credit card responsibly.”
Credit card debt reached an all-time high of over $1 trillion, according to a report from the New York Federal Reserve. So he wasn’t wrong: Americans are carrying the highest level of credit card debt ever, and paying the high interest rates that come with it.
After that conversation with my dad about how to use a credit card responsibly, here are three tips I still use to this day, 20 years later:
1. Start with manageable fees
Instead of charging that $2,000 dining room table right away, make reasonable charges that you can pay off quickly and won’t put you into debt. When you use a credit card to buy an item you really can’t afford, you end up carrying that balance longer and watching it grow due to interest.
Understand that a credit card is not an extension of your income. It is an extension of credit that the credit card issuer expects you to repay.
When I bought my new sofa, instead of putting it on a credit card and making a series of monthly payments to pay it off, I watched it go on sale (40% off on Black Friday) and bought it with cash .
2. Pay off the balance every month
The optimal way to use a credit card is to pay off the balance each month so you don’t end up in debt. Since most credit card interest rates are in the double digits, carrying a balance each month is actually costing you money.
Also, when you pay off the card balance each month, your credit utilization ratio remains low, which has a positive impact on your credit. If your utilization is over 30% it can have a negative impact on your credit score.
3. Never pay late
Once those credit card bills start coming in each month, there’s one thing you need to do: pay them at least the minimum amount paid by the due date. My dad is serious about his credit, and so am I.
When you make a late payment, you may be charged a late fee plus an interest payment on the unpaid balance. Late payments can also hurt your credit score.
When you create your account online, you can set up free text or email alerts that will notify you a few days before your payment is due. Or, if you’re good at managing your spending, take it a step further by signing up for automatic payment so you never have to worry about being late.
Have you struggled to pay your credit card bill and found yourself in delinquency, or even default? Share your credit score struggles and triumphs with this reporter at jstreaks@businessinsider.com.
This article was originally published in November 2023.