Tips And Advice For How To Use A Credit Card

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Master Card and Visa logos on credit cards. (Keith Srakocic/AP)
Master Card and Visa logos on credit cards. (Keith Srakocic/AP)

Nearly 80 percent of Americans have a credit card, according to the Federal Reserve. And the credit reporting agency Experian says total credit card debt is now at its highest point ever.

So are people making the right decisions with credit cards?

Here & Now's Jeremy Hobson speaks with CBS News' Jill Schlesinger (@jillonmoney), host of "Jill on Money" and the podcast "Better Off," about some common conundrums and advice for how to use a credit card wisely.

5 Tips For Credit Card Users

  1. Don't carry a balance
  2. Make payments on time
  3. Use credit cards to get credit history
  4. If you're worried about overspending, consider a secured credit card
  5. Sign up for autopay

Carry A Balance On Your Card? Here's Why You Shouldn't

"If you're looking for credit card 101, it's do not carry a balance — please, do not," Schlesinger says. "I know that a lot of people don't really understand the whys and the wherefores with credit card debt. They certainly didn't before the financial crisis. I would hope that 10 years later, you really start to get a better idea of this, and maybe we need to do a better job of explaining this to people.

"It's like termites. You may not know that that interest is clicking away, but it's there."

Jill Schlesinger, on the pitfalls of carrying a credit card balance

"That's how you get this concept where someone says, 'Well, I just put $100 on my credit card balance, and five years later, it's $300.' Yes, because that interest is insidious. Whether you make that minimum payment or not, the credit card company is calculating the interest that you owe, and it doesn't stop.

"Someone once explained this to me early in my career that the best way to think about credit cards, it's like termites. You may not know that that interest is clicking away, but it's there."

On The Flip Side, Smart Credit Card Use Can Help You

"If you use your credit card wisely, you are establishing this pattern of credit history, and that becomes important when you want to do other things in your life," Schlesinger says. "You may be a young college student or graduate right now ... but maybe one day you'll want to buy a car, and you need to have a credit history, or, a house even. Yes, it will happen to you.

"Credit cards in and of themselves are actually very good, and when we saw the expansion of credit, this was actually seen as a really big benefit to the middle class, and to women and to people of color, because they would have to co-sign credit cards with people who could actually say, 'Oh no, he or she is OK,' or, 'This is my wife, don't worry Mr. Banker, she can borrow money because it's on me.' This was actually seen as a really good step in financial freedom. But again, we did not as a society do a good job of explaining exactly what credit cards were all about, how they work."

Can't I Just Use My Debit Card Instead?

"I get the debit card allure, because it really helps you keep track of your money, and it goes directly to your bank account. But a debit card does not establish a credit history, that's No. 1," Schlesinger says. "No. 2, in instances where there's identity theft or there's a problem with someone who sold you something — maybe an online seller who's not quite as reputable — it can be easier to dispute a transaction with a credit card than a debit card, because the money's already come out of your account in your bank [with the debit card].

"So what I would like to suggest is a healthy balance: You do want to show some credit history. And if you're really freaked out, like people like debit cards because they say, 'Oh I never want to get into this big problem,' you can use something called a secured credit card. It requires you to make a deposit with the bank before you can get the card. It's kind of like training wheels for your first credit card, and that credit limit on the card is equal to the amount you've deposited. And so secured credit cards are often the best way to help build a credit score, but minimize the risk of going nutty."

This segment aired on September 17, 2018.



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