When J.D. Roth went to college 30 years ago, he went through an unfortunate rite of passage: He signed up for credit cards and used them to have fun.
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“Credit cards allowed me to feel like I had the same money as my peers did,” says the founder of the website Money Boss. Over the next five years, he built up $25,000 in debt, which he eventually paid back.
The experience left a scar: Roth, now 48, refused to touch credit cards for years afterward. “I was worried I would just dig back into debt again,” he says. Only in the past decade has he warmed to them again, using credit cards to earn rewards on his spending — but paying the balances in full every month. Roth, who lives in Portland, Oregon, recently used a credit card to buy a $7,000 motorcycle, and he’s accumulating airline points with plans to use them to buy tickets to Europe or Australia this fall.
Fear of credit cards is common, both among people who have gotten into trouble with plastic before and those who have heard such cautionary tales and resolved not to become one. But, as Roth’s story demonstrates, moving past that fear and using credit cards responsibly can produce substantial benefits — rewards that amount to a discount on everything you buy; perks such as fraud protection and rental car insurance; and, for those new to credit, an easy way to establish a positive credit history.
If you’re attracted to the benefits of credit cards but are struggling with fear of debt, consider these strategies from people who have been in the same position.
Write, and follow, your own rules
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When Roth decided to start using credit cards again, he set rules for himself and committed to following them. They included using a card only to make purchases that he had the cash to pay for. “It has to be in the bank,” he says. That way, he knows he’ll always be able to pay off his credit cards in full each month, avoiding interest charges.
Start with limited purchases
Emily Popek, a writer in upstate New York, had shied away from credit cards after building up debt in college. She took a 12-year break from credit cards and recently started using them again with her husband. “We started to get a discount off of gas, to get cash back for travel and to get rewards for Amazon purchases. It was clear we could save money if we did it in a responsible way,” she says.
Find a card that fits your lifestyle
Nora Dunn, the founder of The Professional Hobo travel blog, encourages her readers to use credit cards to earn rewards that can fund their travels, as she does. She has used rewards to buy multiple airfares around the world. Dunn, who lives in Japan, also takes advantage of the fraud protection and automatic travel insurance available through her cards — and she’s careful to pay off the balance each month.
Work with a partner
Libby Fearnley, who avoided credit cards after building up debt in her 20s, started using them again with the encouragement of her husband. “He said, ‘You need credit if you’re going to buy a house,’” she recalls. She resisted, at first, because she didn’t want to get caught in the trap of paying for items she couldn’t afford, but she decided to start using a shared card with her husband for limited purposes.
They use the card to earn cash back on certain purchases and for big items such as airline tickets. Together, they make sure to pay off the bill each month. “So I’m getting the benefits without the risk,” says Fearnley, 38, a writer in New York.
Track your spending and pay on time
Matt Becker, a certified financial planner and the founder of Mom and Dad Money, a financial planning practice based in Pensacola, Florida, says the biggest benefit of using credit cards for most of his spending is the convenience of tracking all those expenses. “All of my transactions automatically get pulled in more easily than with cash,” he says of his online tracking system. “I don’t even have to remember it or worry about it.”
Becker also automates monthly payments to make sure he never misses one. That helps build strong credit. “We have an extensive credit history of making payments on time,” he says. That’s particularly useful now that he is in the process of buying a house.
As these credit card users can attest, moving past fear lets you focus on the good things credit cards can do for you when you use them wisely, rather than the bad things they can do to you if you don’t.
Kimberly Palmer is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @KimberlyPalmer.