These are some tips I wish I had known when I started using credit cards. It’s part of life that we need to establish credit to get a loan to buy things like a car or a house.  But we can also fall into the credit trap and get into a pile of debt.

Here are 3 tips for using credit cards:

1. Pay Off the Balance Each Month

I know it’s easy to tell someone that if you use your credit card, make sure you have the money to pay off the balance when the billing statement arrives. Many of us don’t, and then carry the balance from month to month. That’s okay!

Just try to get a card with a lower interest rate if you can.  The interest rate is the fee the credit card company charges if you carry a balance each month.  It’s based on the annual percentage rate or APR (calculated using the U.S. Prime Rate + what the banks charge).  You can find this information on the credit card company’s website or inside a mailed solicitation so you know how much they charge before you apply.

The credit card companies charge interest on the balance each month if it is not paid in full. If you have a higher interest rate, this can result in a hefty amount paid just to interest.

For instance, on a credit card at 20.65% carrying over a $4,900 balance, you would be paying $86.00 just in interest charges per month! That’s nuts but reality.

2. Decide What is a Want and a Need

For someone of us, the reason why we use credit cards is that we may not have the money to buy the things we want or need.

To remedy this, when you go shopping, make a list of what you need. This way it will help you keep on track to buy what’s necessary. If you see something you want, ask yourself, do I want this because I really do need it, or is it something I could do without? By asking the question, it helps you to evaluate the purchase as to whether you want to buy it.

3.  Watch the Lure of Points

I had a credit card where I got points for gas, points for buying food and points for anything else. The points lead to getting cash back, so I thought it was a good idea to use it.

Well, I racked up too high of a balance each month that I couldn’t pay off and the little money I “earned” (I use the term loosely) was not anywhere near what I was charged in monthly interest.

So you can earn the money if you pay off the balance each month, but that can be tricky for some people.

Just be mindful of it and don’t fall for the idea that you can earn money just for using the card.