This is the fourth post in a multi-part series on how to manage your finances so you can build up your savings, have a safety net, and still live comfortably today without having to live paycheck to paycheck. Click here for part 3, which discusses how to tackle your nagging debt.

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Credit cards are not loans

It’s no surprise that Americans have a lot of credit card debt. In fact, it’s estimated that the average household with credit card debt owes around $15,799 on their cards¹. That’s a lot of money to owe – especially if you don’t have it. That kind of debt can take years to pay off, and can severely affect your credit score. It goes without saying that you should try to avoid credit card debt – especially with the ridiculously high interest fees that card issuers are charging these days.

So why would you use your credit cards at all?

1. Convenience
   
   If you are disciplined enough to pay off your credit cards every month, in full, you can avoid getting caught in a spiral of debt while also taking advantage of the convenience that your cards provide. If you’ve set up automatic balance payments from your checking account to your card, you don’t even have to take any actions yourself (other than making sure you’re not spending too much).
2. Build your credit score
   
   Buy having a lot of available credit, but not using all of it, you build up your credit score. The ratings agencies like to see that people have discipline. If you have a lot of cards, though, it’s important to make sure you pay off each one on time. The longer you maintain a track record of on-time payments, the better your score will be.
3. Get points and cash back
   
   This is obviously the biggest benefit of using a credit card. The more you use it (in moderation, of course), the more money you can earn back. By using a credit card for all of your payments, you can actually save save money, when compared to using cash. Just remember, pay it all off.
4. Protected against identity theft
   
   When you use your credit card, you have the power of your bank behind you. If something goes wrong, you can cancel fraudulent transactions, or get your money back from a merchant that tried to rip you off. You won’t be responsible for any charges made without your authorization.

There you have it. As long as you can think of your credit card as cash straight out of your pocket as opposed to free money or a never-ending loan from your bank, you can actually use credit to your benefit. In the next article, we’ll discuss how to approach paying for large purchases so you can avoid financing them and falling into the debt trap. Read on.

¹http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php