Last week we looked at how easy it was for consumers to accumulate credit card debt, and we provided some practical steps how to reduce this liability over time. While the words ‘credit card’ and ‘debt’ tend to run hand-in-hand, owning a credit card doesn’t have to be a negative thing.

A credit card is just a tool that can help you to manage your cash flow and bill payments. However, like any other tool, if it is handled incorrectly, it can hurt the user. To be successful with credit card usage, you have to learn how to be credit card S.M.A.R.T:

S- Start with your budget

Your credit card should always be used along with your budget guide, to ensure that you’re making purchases that you can really afford. Identify those expenses that can be paid with a credit card, and don’t charge more on your card than you would have paid if you were using cash.

Think of your credit card as a mere convenience that’s safer than carrying cash, instead of a credit line to buy things you can’t afford. Make sure that you already have the money put aside to pay for the expense, or that you’ll have it by the time the credit card bill is due.

M- Manage your credit

Remember that your credit card is to be used only to help you meet your regular monthly bills and in the event of any emergencies. It is therefore unnecessary to accumulate many credit cards and large credit limits. Increasing your credit amounts can lead to temptation to overspend, so keep your available credit amount in line with your life style.

Another way to manage your credit is to be aware of the cut-off date for recording transactions on the card. You can extend your payment time for a bill by making the credit purchase fall outside the date that will require you to pay for it in the next month.

For example, if your statement date is the 25th monthly, all recorded purchases from the 26th of May to the 25th of June will appear on your next credit card bill. You will be required to pay for these purchases maybe by the middle of July.

If you wanted more time to pay off a particular expense, you could charge it on your credit card after the 25th of June, so that it would be due in August.

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A- Avoid high fees and charges

Credit cards can be a very profitable source of revenue for financial institutions. While the annual fees may be unavoidable, you can prevent excessive interest charges and fees. Always pay your bill by the due date, to avoid a late payment penalty. If the due date doesn’t fall on a work day, pay it before.

If you’re near to your limit, call the card company to find out how much credit you have available, so you avoid being charged an over-the-limit fee.

NEVER use your credit card for a cash advance. On regular purchases, you don’t have to pay interest charges if you pay off your bill in full by the due date. However, with cash advances and convenience cheques, interest is immediately calculated from the date of withdrawal until the repayment date.

Some cards also charge a transaction fee which can be a percentage of the cash amount withdrawn. My advice: use a debit or ATM card to get cash instead, it’s cheaper!

R- Repay in full each month

This is the cardinal rule of SMART credit card usage: use the card for convenience, and pay off all bills by the due date. If you had to use the card as a short-term credit facility, make a plan to pay off that expense within the shortest possible time. If you receive a lump sum like a partner draw or bonus, you can use it to pay off outstanding balances.

T- Take advantage of incentives

The ultimate goal for the SMART credit card consumer is to have a card that gives rewards and incentives for using it. There are credit cards that are tied to loyalty programmes, which give you points that can be redeemed for goods and services at participating merchants.

Some cards offer cash rebates, where a percentage of what you spend is given back to you. Other credit cards offer frequent flyer miles with every dollar charged on the card.

You don’t have to be afraid of taking out a credit card, just be SMART in how you use it!