How to Use a Credit Card - Over 65% of Americans Use Them Wrong

Read time: 4 minutes

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With the average credit card interest rate being 20.68%…

…the last thing you want is to carry a balance on your credit card.

However, that is exactly what 65% of credit card holders are doing.

But - how did we get here?

It all started when we got our first credit card.

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The #1 Mistake

Growing up in my family, credit cards were evil. 😈

Avoid them at all costs…

…and only get one if you need extra cash you do not have.

THAT is the #1 mistake!

Believing that a credit card is used for cash that you do not have.

In the last resort of situations…

…yes, that can be true.

But that should not be the default use for a credit card.

Credit card companies should be paying YOU to use their services, not the other way around.

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How Should We Use a Credit Card?

First: Use it as an extension of money you already have

I use my credit cards as an extension of the money I already have.

That allows me to pay off my credit card at the end of each month…

…and accrue $0 interest.

In the past 9 months, I’ve actually been “paid” over $566 in rewards to use my cards.

These rewards can be in the form of cash-back or points that can be redeemed for things like hotels or flights.

We can separately go deeper into what point hacking is since I’ll probably get closer to $1,000+ of value, but that is not the focus here.

Second: Credit cards provide a layer of security

Have you ever had your debit card details stolen with unauthorized charges?

You end up having to sit and wait when the bank is taking their sweet time figuring out the dispute.

The layer of security with a credit card is that the money does not immediately come out of your bank account.

Not even during a dispute.

That was HUGE for me when I was just graduating college and living paycheck to paycheck.

Having $200 pulled from my account by some fraud was enough to stress me out from paying some bills on time!

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Do’s ✅

• Spend only the money you have in the bank
• Pay on time to avoid fees and maintain credit history
• Utilize rewards wisely; avoid overspending for rewards
• Pay in full to avoid interest

Don’ts ❌

• Don’t max out credit line
• Don’t spend outside your limits
• Avoid paying only minimum payments

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What If I Already Have Credit Card Debt?

As of December 2022, the average U.S. credit card debt was $7,279.

That at least provides a baseline of where you may be at compared to the average.

Getting the balance down to $0 as fast as possible would be my top priority.

There are even ways to negotiate your credit card balance to help drive that to $0 even faster.

But what about investing?

Rarely can any investment have a better return to beat the 20.68% debt interest rate of a credit card.

So that means…

…paying off the credit card first will actually benefit you more than even the best years of the S&P 500.

Paying off the credit card and eliminating the debt IS the investment.

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Two Ways Out

There are two traditional ways to do this:

1. Make more money
2. Spend less money

It isn’t easy…

…but that isn’t the point.

The point is to recognize the situation and quickly take action to resolve it.

The longer you wait…

…the harder it gets.

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Related Resources

• Save more money: How to Make a Budget
• Make more money: Top 3 Tips When Making Your Resume
• Reduce your credit card balance: 7 Ways to Negotiate Your Credit Card Balance

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Statistics: Lending Tree

This article is for educational purposes and not financial advice. Please consider consulting with a licensed professional before making any financial decisions.