Credit cards can actually be great for your financial wellness—if you use them responsibly

I didn’t receive a robust financial education from my parents while growing up, but my mom did offer one piece of advice that stuck with me: Credit cards are like guys who post shirtless mirror selfies on dating apps. That is, they’re to be avoided at all costs. I’ve often wished that I hadn’t ignored her, given the amount of cash I’ve lost to interest payments since I got my first swipeable piece of non-debit plastic in college. But many financial experts would say I actually wasn’t being irresponsible by opening my first line of credit. Because while credit card debt may well be a financial buzzkill, the benefits of credit cards can be valuable for leveling up your financial wellness, so long as you use them wisely.

“Credit cards are like other financial products and tools—they are neutral, neither good nor bad,” says Amanda Clayman, certified financial therapist and Prudential’s Financial Wellness Advocate. Of course, plastic does come with some well-recognized risks: Not only can cards carry high interest and fees, but they can tempt an overspending habit and make slipping into debt feel a bit too easy. According to Clayman, it’s because of these risks that many people have relegated credit cards to the “swipe left” category.

However, Clayman suggests that before writing them off, it would be wise to learn about the power credit cards wield when it comes to improving your financial wellness. “Rules of thumb are helpful when we need to make quick, simple choices, but most financial decisions benefit when we take the time to get informed about the more nuanced facts,” she says.

So what are the benefits of credit cards, when it comes to financial wellness?

Perhaps the biggest advantage of responsible and regular credit card use is that it can strengthen your credit history—a component of your credit report that shows your ability to pay off debt—and credit score. “Having a good credit score comes in handy when you plan to borrow money, of course, but there are other times when your credit history and score may impact you,” says Paco de Leon, financial expert and founder of The Hell Yeah Group. “When you apply to rent an apartment or house, your credit is a factor. Some employers may check a modified version of your credit report before deciding to hire you. And you might be able to qualify for insurance discounts with a strong credit score.”

Perhaps the biggest advantage of responsible and regular credit card use is that it can strengthen your credit history.

Some cards also offer perks, like airline miles and cash back, but De Leon warns that these are only worthwhile if you pay off your balance in full every month and don’t accrue interest on your purchases. “If you’re getting into debt because of reward points or cash back, you’re shooting yourself in the foot,” she says.

How to use credit cards to improve your money game

When it comes to knowing how to use a credit card “responsibly,” the first step involves getting clear on your own financial picture. To start, says Clayman, review your credit report and credit score. (You can request a free credit report once every 12 months through the Federal Trade Commission, and many banks offer free credit-score reports to their customers on an ongoing basis.) Then, do some online research to compare the benefits of credit cards from different lenders. De Leon recommends looking for a card with no annual fee (or the lowest fee possible) and also carefully examining credit card interest rates. “If you are carrying a balance [meaning, you’re not paying off your bill completely each month], a healthier credit card has the lowest interest rate that you are able to qualify for. Or, even better, a zero-percent rate, usually for a limited time,” she says.

“If you are carrying a balance, a healthier credit card has the lowest interest rate that you are able to qualify for. Or, even better, a zero-percent rate.” —Paco de Leon, financial expert

Once you have your card in hand, make sure you’re only spending as much as you’re able to fully pay off each month. “If you can’t pay off the balance each month, then you may be spending too much, earning too little, or a combination of the two,” says De Leon. Clayman adds that she often sees clients increase their monthly spending as their available credit amount increases—a phenomenon called “lifestyle creep” that can also arise when you get a pay raise. As you can probably imagine, this is to be avoided. “Having a credit card is not ‘free money’ or a get-out-of-jail-free card if you accidentally overspend,” she says.

If you find yourself frequently charging more to your credit card than you can pay off, De Leon suggests setting up a spending limit on your card. “I’m a big fan of protecting yourself against yourself,” she says. “It’s easy to come up with excuses as to why you overspent, but it’s also easy to use tools like a spending limit to cut you off when you’ve had enough.” As for those who still find themselves overspending with these protections in place? “Maybe you need to stop using credit cards until you get to the root of the issue,” says De Leon. After all, while credit cards can help you build up your credit score, racking up too much debt will knock it right back down again.

Stressed about your finances? Use the 80/20 rule to develop a healthier relationship with money.  Then, consider opening a “fun and BS” account to keep yourself from overspending on the weekends.