Using Your Credit Card Isn’t the Same as Racking Up Debt

One of the common misperceptions associated with credit cards is that using your credit card is the same thing as racking up debt.

I hear it all the time — “I don’t want to use credit cards because I hate being in debt.”  Who said just using a credit card means you’re in debt?

While using a credit card is, technically, using debt, the reality is that just using your credit card isn’t going to result in large amounts of debt.

It’s the failure to pay off your balance each month that results in credit card debt.

We can take it a step further and say that for some using a credit card is too easy and they end up spending money they can’t cover.  But for now let’s just focus on the concept of carrying a credit card balance.

Carrying a Balance = True Credit Card Debt

While it’s true that swiping your card means that you are using someone else’s money to make a purchase, it doesn’t necessarily mean that you are building up large amounts of debt.

The difference comes in when you pay back the money that you use.  The savvy credit card user repays the money almost immediately, paying off the balance in full each month before interest charges are levied.

It’s only when you begin carrying a balance that you are building up credit card debt.  

When you buy something with the credit card, and then only pay a small portion of the money you borrowed at the end of the billing cycle, the rest is carried over.  The amount that you carry over is subject to interest charges, and these charges are added to the total balance.  As you carry a balance, you begin to build up debt.  And, if you don’t at least pay off the interest charges, your balance can build over time — even if you don’t buy anything else using your credit card.

Of course this all gets worse if you aren’t paying on time and you get hit with late fees.

Your Credit Card Should Be a Tool

Credit cards are tools

Credit cards are a tool. You either use it correctly or you don’t.

Your credit card can be a great financial tool used on your behalf.

If you carry a balance, and begin racking up debt, the credit card is a tool for the issuer, since you end up paying interest.  However, if you pay off your balance each month, and avoid paying interest, your credit card is your financial tool.

Many credit cards offer rewards programs that can provide you with the opportunity to earn cash back, free stuff, and other perks.  When you use your credit card, you can accrue these rewards, improving your financial situation.  It’s possible to plan your spending so that you earn $50 or more in cash back during a month.  That’s $600 a year.  That’s not a bad addition to your finances, especially if you invest the money for a return.


Instead of thinking of your credit card as evil, and as a diabolical instrument of debt, start thinking of it as a tool.  If you use your credit card for planned purchases, and integrate your credit card use with your budget, you can actually come out ahead.  Make sure to only charge what you planned to spend anyway, and then pay off the balance in full.  That way, you aren’t building debt.

These days there are so many apps, both from credit card issuers and from other companies, that tracking your spending is easy.

Adjust the way you think about credit and credit cards.  Realize that credit cards aren’t evil themselves.  You can accomplish a lot of good for your own financial situation with the help of credit cards, as long as you are careful, and plan ahead.



Published or updated July 15, 2013.


  1. I agree. I use Credit Cards to my benefit whenever possible. There are times where I need an extra month or two to pay one particular purchase off but generally I pay the balance of each month and rack up the rewards points. I like to make money off of them and not the other way around.

    • So long as you pay off your balances quickly so that your interest isn’t more than you rewards you’re OK.

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