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More people are being approved for credit cards than ever before. Unfortunately, credit card debt is also at an all-time high. At the beginning of 2017, 171 million people had a credit card from a major bank. By September 2017, the amount of total consumer revolving debt had climbed to more than $1 trillion.

But using a credit card and being in debt isn’t the same thing. It’s possible to use a credit card and not get over your head in debt. In fact, it’s possible to use a credit card and avoid debt entirely.

How Credit Cards Work

A credit card is a revolving debt. When a bank approves you for a card, they typically give you a spending limit, which can be anywhere from a few hundred to several thousand dollars. Some cards have no preset spending limit.

You can use the card to make purchases up to the spending limit. That means if your card has a limit of $2,500, you can make one single $2,500 purchase or multiple purchases that end up adding up to $2,500. You also have the option of not spending up to your credit limit. For example, you can make just one $100 purchase on your $2,500 credit card.

Each time you pay off the balance on your credit card, you reset the spending limit. So if you had a $2,500 limit and charged $2,000 on the card, you would have $500 remaining. Once you pay off the $2,000, you have $2,500 to spend again.

Of course, getting access to that money doesn’t come for free. Depending on the type of card you have and the terms of the payment agreement, you might pay a range of fees:

• Annual fee — An annual fee is an amount you pay each year for the privilege of having a credit card. The amount of the fee varies by card and not every credit card charges one. If you qualify for a card that does not charge an annual fee, it is a better choice than one that does.

• Interest — If you end up carrying a balance on your card — meaning you don’t pay the full amount you’ve charged on the card by the due date — you’ll end up paying interest on the remaining balance. Interest rates vary by card and are based on your credit history and on the market rate. Interest charges are also called finance charges.

• Over-limit fees — If you spend more than your credit card’s limit, you’ll likely have to pay a fee.

• Foreign transaction fees — If you use your card while traveling in another country or using a different currency, you might have to pay an extra fee.

• Late fee — If you miss a due date or pay late, don’t be surprised by a late fee charge on your next statement. That’s all fine when there’s no issue with the transaction. But what if the item you purchased breaks, or you need to return it? Or, what if the item you ordered never arrived? If you use a debit card, you’ll be out the money you spent on the purchase until the return is processed or your claim goes through. But if you use a credit card, you have leeway until your money leaves the bank. Additionally, if someone were to steal and use your debit card, they could drain your bank account quickly, leaving you with nothing to pay the bills.

• Cash advance fee — Many credit cards let you borrow cash, but also charge a hefty fee for the privilege — usually around 5 percent, or at least $10.

Why Credit Cards Are Useful

Credit cards are useful for a few reasons. For one thing, they can help you balance your budget or manage your cash flow. Some people prefer to make all their necessary purchases for the month on a credit card, then pay off the balance in full by the due date, so they don’t end up in debt.

For some, it’s easier to have all their purchases in one location, rather than having to scrounge up cash to make each payment.

Credit cards can offer a bit more security and peace of mind than other payment methods, as well. For example, if you make a purchase with a credit card, you’re not immediately parting with your money. The bank that owns the card is fronting the money. In contrast, when you use a debit card, the money leaves your bank account right away.

That’s all fine when there’s no issue with the transaction. But what if the item you purchased breaks, or you need to return it? Or, what if the item you ordered never arrived? If you use a debit card, you’ll be out the money you spent on the purchase until the return is processed or your claim goes through. But if you use a credit card, you have leeway until your money leaves the bank.

Compared to debit cards, credit cards typically offer a bit more protection. For example, if someone steals your card number and makes a bunch of purchases, you won’t be responsible for more than $50 worth of those purchases. Many card companies offer $0 fraud protection, so you aren’t responsible for any fraudulent purchases.

If someone steals your debit card and uses it to make purchases, you might be responsible for up to $500 worth of fraudulent purchases, or wholly accountable, depending on how soon you report the theft. Additionally, if someone were to steal and use your debit card, they could drain your bank account quickly, leaving you with nothing to pay the bills.

Benefits of Using Credit Cards Responsibly

Along with offering you greater protections than debit cards, credit cards provide some financial benefits when used responsibly.

Helps You Establish Credit

If you ever hope to take out a mortgage or other significant loan, you need to have a decent credit score and history.

Applying for and using a credit card helps you build up your credit, making you a more appealing borrower to lenders. Plus, the longer your credit history and the better your history of making on-time payments, the more likely you are to get a lower interest rate and better terms on a mortgage or other loan.

Provides Insurance Protection

As a perk, many credit cards offer some form of insurance protection. One common type of insurance offer is for rented automobiles.

If you need to rent a car, you can just use your credit card to pay for the rental and decline the insurance offered by the rental company. You’ll avoid paying the extra fee for insurance, which helps you save money. If you have an accident while driving the rental car, you call your credit card company to submit the claim.

Along with offering car rental insurance protection, many credit cards provide travel insurance, roadside assistance and lost luggage reimbursement.

Offers Purchase Protection

When you use a credit card to buy something, you often get some form of purchase protection. That protection can take many shapes. Usually, you can dispute a charge on your account. For example, if you see a purchase on your card statement you don’t recognize, or that’s for the wrong amount, report it to the card company. The bank will then investigate and remove the purchase if it’s fraudulent, or correct it if it’s inaccurate.

Another way using a credit card offers you more protection than using cash or another payment method is that many cards offer extended warranties or purchase security. For example, if you buy a TV with your credit card and that TV breaks the day after the warranty expires, your card might offer additional protection beyond the time of the initial warranty.

Some cards offer protection if an item breaks within a set time frame after the purchase. Usually, the protection is for up to a certain amount, such as $500. For example, if you buy a lamp that costs $100 with your credit card and that lamp breaks 50 days after purchase, your card will reimburse you the $100.

Offers Convenience

Another benefit of using a credit card is that the cards tend to be a lot more convenient than cash or checks. These days, it’s difficult to make some kinds of purchases — such as booking a hotel room or making purchases online — without a credit card.

If you travel frequently, a credit card can help you avoid having to exchange currency quite so frequently, which can save you money and help you avoid collecting piles of coins and cash. Businesses in foreign countries are more likely to accept a credit card for payment than they are a debit card from another country.

Many Cards Offer Rewards

While not every credit card out there offers a rewards program, a great many do. If you use a credit card responsibly, you can often end up making money from it, either in the form of cash back, travel incentives or other bonuses. Often, a card will offer a bonus reward when you first sign up.

For example, a cash-back bonus card might give you an extra $100 in cash or rewards after you’ve had the card for 90 days if you make at least a certain amount of purchases on the card. A travel rewards card might give you 1,000 miles free after you sign up.

Responsible Credit Card Use Doesn’t Cost You

Perhaps the most significant benefit of using a credit card responsibly is this: It doesn’t cost you a thing. If you find a card that has no annual fee and you pay the balance in full by each month’s due date, you won’t end up paying any finance charges or interest.

If you have a rewards card, you are essentially making money by using your credit card. Even if you don’t have a rewards card, you can still benefit from using a card with care.

Negative Effects of Not Using Credit Cards Responsibly

Having and using a credit card isn’t all sunshine and roses, though. Some people do struggle to use their cards responsibly. As the number of cards out there and the amount of credit card debt have increased, so has the number of delinquent accounts. Between 2016 and 2017, the percent of newly delinquent credit card accounts rose from 3.5% to 4.4%.

A credit card minimum repayment calculator can help you see the difference in cost between paying a balance in full, and making the minimum payment each month until the balance is paid off. Your credit card statement will also include a chart letting you know how much longer it will take you to pay off a balance if you make only the minimum payment, and how much making just the minimum payment will cost you regarding interest.

Missed Payments and Your Credit Score

Not paying your credit card bill on time can hurt you in a few ways. For one thing, it can lower your credit score, which can make it more difficult to get additional credit. Your payment history makes up about 35 percent of your FICO score, so if you have several late payments appearing on your credit report, your score can fall a bit.

It’s important to understand what counts as a missed payment, and how missing a payment affects your score. If you are late with a payment but pay within 30 days, it won’t appear on your credit report. Your card might charge you a late fee, but some cards do waive the fee for a first-time late payment.

If you don’t pay within 30 days of the due date, the missed payment goes on your credit report, which can affect your score. After 60 days without payment, your credit card might increase your interest rate.

Having a low credit score doesn’t just concern your ability to apply for additional loans. It can also impact other areas of your life. For example, some employers check credit as part of their background screening for new hires. Insurance companies might also check your credit and adjust the rate quote based on your score.

Credit Card Debt Can Be Expensive

Another issue with having a credit card and not paying it off in full each month, or having a credit card and charging more to it than you can afford to pay back, is cost.

Credit cards tend to have some of the highest interest rates, making them among the most expensive types of debt. Although the exact amount your card will charge varies based on your credit history and the kind of card, average interest rates in 2017 ranged from 15.37 percent to 20.90 percent.

A credit card minimum repayment calculator can help you see the difference in cost between paying a balance in full, and making the minimum payment each month until the balance is paid off. Your credit card statement will also include a chart letting you know how much longer it will take you to pay off a balance if you make only the minimum payment, and how much making just the minimum payment will cost you regarding interest.

Missing payments or going over your credit limit can also add to the cost of having a credit card. Late payment fees vary, but usually cost between $15 and $35 every time you’re late with a bill.

Over-limit fees aren’t as common as they once were, since you need to purposefully “opt-in” to the fee, meaning you have to tell the bank directly that you want to be charged a fee for going over your spending limit. If you don’t opt in, your card will most likely get declined if you try to purchase something that would push you over the limit.

If you do opt-in, your card can charge you $25 the first time you go over, and $35 the next time you exceed the limit within six months. The amount of the fee can’t be more than the amount you’ve gone over, though. So if you exceed your limit by $20, your credit card can’t tack on a $25 fee.

Credit Card Debt Can Get in the Way of Life

Even if you pay more than the minimum amount due each month, having a lot of credit card debt can prevent you from setting or reaching other financial goals. For example, if you are paying off a large credit card balance, it can be challenging to save money for a down payment or other big purchase.

Part of using a credit card responsibly is finding the right card for you. Here are a few questions you can ask yourself when selecting a card.

• What do you hope to get from the credit card? Different types of credit cards offer different benefits. Some, such as secured credit cards, are designed to help people with low or damaged credit scores build up their credit. Others are designed to help people who travel a lot get more airline miles or cash back on travel purchases.

• What fees does it charge? If you can, it’s often a good idea to avoid a card with an annual fee. But, in some cases, paying the fee can be worth the benefits a card offers. For example, if you apply for a rewards card that costs $100 per year, and you will rack up well over $100 worth of rewards annually, the credit card can be worth the fee.

• What is the interest? Some cards offer very low-interest rates as an introductory or teaser rate, while others charge the same rate on day one as they do on day 100. Knowing how much you’ll have to pay in interest helps you answer the question, “How long will it take to pay off my credit card?“

• What rewards does it offer? Rewards programs differ. Some give you the same amount of cash back, points or miles no matter what you purchase, and others have specific categories and might give you 3 percent back in category A, 1 percent back in category B and 2 percent back in category C.

• What’s your credit history like? Some credit cards are only available to people with scores above 740, or with excellent credit scores. Other cards designed for people with lower scores might have higher interest rates or more fees.

• What’s a secured credit card? Secured credit cards typically require a deposit before you can use the card. The deposit acts as collateral for the card, so if you end up missing payments or don’t pay the card at all, the bank isn’t completely out of its money. Usually, secured credit cards are ideal for people who are trying to re-establish credit or who have no credit history.

Before you apply for any credit card, it’s a good idea to read all the fine print on the card offer. You want to be sure you understand what fees, if any, the card charges, and what the interest rate is. If you’re applying for a card that offers a low or 0 percent introductory rate, be sure you know when the rate expires. In some cases, an introductory rate might vanish if you pay late, so be sure you fully understand the terms of the rate offer.

Credit Card Interest Calculator

If you have a balance on your credit card, you’re probably wondering how to calculate your credit card payments so you can pay the balance off quickly and end up carrying the least amount of interest. Using a credit card interest calculator can help you see how much you’ll end up paying in interest over the life of the debt. You can also adjust your payment amounts to reduce the amount of overall interest you’ll pay and to reduce the amount of time it takes you to pay down the debt.

Along with figuring out how much to pay toward your credit cards to get out of debt, it can be helpful to create a budget so you understand how much you can spend each month to avoid getting deeper into debt or to break the cycle of debt. Using a budget calculator can help you see what you need to save or how much you need to earn each month to meet specific financial goals, such as saving for a down payment or ultimately becoming a millionaire.