Credit cards... starting from a VERY early age we find out about the joys and pitfalls of credit cards. Can they be used to your benefit? ABSOLUTELY! Can you get into a REALLY big hole VERY fast if you are irresponsible, you betcha! So with the understanding that you are on a very slippery slope what should you do? Personally I never use cash anymore if I can help it. Why? Because every credit card out there has reward programs that make it just plain silly to not get something when I spend something. Simple as that. The problem is that people look at what they are getting back and think they can spend more, or that they have a zero interest rate for X period of time. So what are some things you can do to make sure that this trap doesn't catch you, but that you still benefit?

First you must understand the difference in credit cards. There are secure cards, unsecured cards, and we all have seen the logo on our bank cards so what is that all about? Lets start with secure credit cards. This can be done in one of two ways. One you put money on the card as a "security hold" you can spend up to that amount (kind of like a debit card), yet you get a bill at the end of the month. The purpose of this bill is that if you pay it (and they don't have to dip into the security deposit) they report you to the credit bureaus in a favorable light. You can also use collateral like a credit line on your home. Where if you don't pay they can have something tangible to come after you with, not just your credit score.

Unsecured cards can only affect your score if you don't pay on them. They have nothing tangible that they can come after, only your score (which no one knows how they come up with that). An unsecured card will only ask for your SS number when you apply (along with your personal info of course).

And finally your bank card has a logo on it, this does not always mean that you can use it as a credit card. Some are linked to your account and will only allow you to make a charge using you pin number. Others will allow you to charge whatever you want but you will be hit with some hefty fees for doing so. Many will take it as though you overdrew your account so you could have an additional fee there.

Now the second thing you have to understand is that there are 2 different types of credit. Installment and revolving. Both of these affect your score differently depending on what you are trying to accomplish. A home loan is an example of an installment credit type. You have a certain amount and you know what your monthly payments are. Other places that use this type of credit are furniture locations and car loans.

Revolving credit is more along the lines of credit cards or lines of credit. You have X amount that you have access to, and you can use some, all or none depending on your situation. You do not want too many revolving accounts on your credit or it looks like you have access to more than you can reasonably pay off and it makes it harder to get the installment loans when you need one. The rule of thumb is to make sure you always use less than 50% of your revolving accounts. In other words if you have $5,000 available on a card, you don't want to have a balance of more than $2,500 on your card at any time.

If you are having a problem getting a loan due to too much revolving credit you can do 3 things. One you can pay down some of your cards to show that you are responsible and use the money wisely. This process takes about 2-3 months to see an improvement on your score. Two you can cancel a card. DON'T do this option! Canceling a card hurts you tremendously! A better option is the third option which is to call the company and request they lower the amount available. You can simply tell them that you don't need access to that much.

Now that you understand a little more about how the cards work, how can you use them responsibly? The first thing to do is make sure that they have online access to your account. This has proved invaluable to me in making sure we don't get out of hand. I check them weekly just like I do our bank accounts. By doing this you can really see where little things add up. For example, if you buy lunch out every day at work. Use the card for a week and see how much you are actually spending eating out. You will probably be shocked! Managing a credit card is identical to managing your bank account. You must watch them both and make sure that there is enough in the account to cover the credit charges.

If you are spending more on the credit card than is coming in you are in for trouble. Most Americans don't realize this until they are so far in that they are literally about a year behind in debt. With credit cards this increases monthly due to charges. Now while you don't want to pay off the card 100% every month you want to make sure that you CAN. Personally we leave $10 on the card at the end of the month.

Ignore that minimum payment due! This is how they lure you in to owing more than you can possibly pay off! Look at your statement, subtract $5-10, and pay that. EVERY month.

The key to responsible use of a credit card is simple. Don't use it as a loan. Use it as a way to get something for what you are spending. The merchant pays for your rewards when you use a card so do some research find what you can use. Check out the sites that offer cards and DON'T apply for all of them, just the one that would best suit your needs. If you apply for 3-4 at the same time you won't get any. If you just applied give it a month or so! There are ads everywhere and we are flooded with them in the mail. Take some time and do some research!

I suggest staying away from frequent flier miles or things that lock you into what they want you to spend money on. Get something with cash back, and here is a key! DON'T TAKE IT OUT. Yes you heard right, don't take it out until you are ready to put it away. This is money that you did not expect to have, and you should not bank on it. We use ours at the end of the year and put it into an IRA so it isn't much but it is better than nothing.

Again the most important thing to using your card responsibly is to realize that while it seems like an easy way to get money you should not use any more than what you have to pay it back. If you keep that rule in mind you can use cards to your benefit and enjoy the rewards that others are getting without falling off that slope into debt and all the problems entailed with it!