Yesterday I had the opportunity to submit my thoughts on how one avoids paying fees and interest while building a great credit score and a solid arsenal of major credit cards for an online institution. I love the challenge of coming up with new ideas regarding credit cards because, although they can create financial problems for many, they also can create financial achievements for others.

“Did she use the words financial achievements?” Yes, I did. Credit cards used properly can help you build a solid credit score; can help you leverage your money in relation to surprise expenses, and so much more.

The goal is always to avoid paying fees and interest while building a great credit score.

The best way to do this is to follow these 3 simple rules:

1. Use one credit card for all your budgeted monthly expenses such as your grocery bills, gas, eating out, etc. and PAY THE BILL OFF IN FULL each month.

2. If you do incur a balance on a credit card, call your other credit card companies and request a 0% interest rate transfer. Although you do incur a transfer fee this is the smartest way to pay down a credit card balance.

3. Keep your other existing credit cards open but do not use them. Tuck these credit cards into a safe “hiding spot” such as a safe deposit box or at least a desk drawer where they are out of sight. Building strong credit requires that your ratio of credit available to credit used is relatively low. Keeping 2 or 3 credit cards open will not only help out your credit score but will give you options should you need to do a 0% interest rate transfer.

In my experience the majority of financial advisors blanket this conversation topic with an overwhelming response, “don’t use your credit cards….ever!” I just simply think this advice is not realistic particularly for us Gen Xer’s. Let’s face it; we grew up with credit cards. From the moment we stepped foot on our college campus we were inundated with credit card offers. For many of us this marked a moment in time when we finally felt like we were adults. For many of us this was the start to a terrible relationship with our credit card debt.

What mistakes should consumers avoid in the process?:

The consumer, particularly the young professional, should avoid using their credit cards as a crutch. It is essential that you construct a comprehensive budget that you update every month. I even advise young professionals to print out a small copy of their budget and keep it with them in their wallet in a place where it is visible every time they open their wallet. This will help keep their spending on track and keep them accountable to their monthly expenses. In today’s society young professionals are constantly confronted with images in TV, Magazines and Online of the “things” that a young professional should possess to be successful. These “things” carry a hefty price tag and have single handedly helped credit card companies build fortunes.

Consumers should also be aware of the interest rates on their credit cards. Some credit card companies are charging 24% and higher in interest charges. That means for a $100 charge that is not paid off the consumer is paying an extra $24 in interest charges, or almost a quarter more than their purchase. If that balance is not paid off in one month the 24% begins to compound spiraling into an out of control debt. With the average consumer credit card debt of $5,000 plus these numbers begin to multiply fast. Credit card companies understand that the average consumer is not even aware of the amount of interest they pay nor how they can begin to counteract this process.

The lesson is to use your credit cards wisely or don’t use them at all!

A few smart strategies:

• Use a credit card that offers rewards for your purchases. If you spend $1500 a month on your credit card you can earn well over 20,000 points every year. These points can purchase vacations, discount car rentals, airfare, and Christmas gifts and so on. Put yourself in the driver’s seat with the credit card company.

• Gather together all your credit cards and make a list of each card and its corresponding interest rate and credit limit. For credit cards with interest rates over 12% contact the company and request a lower interest rate. For credit cards with limits substantially over your monthly budgeted expenses contact the company and ask them to lower your credit limit so that you are not tempted to use the credit in an adverse manner.

• Put all your monthly budgeted expenses on one credit card. This is essential for the ease of tracking your expenses and the simplicity of making one payment.

• Most financial professionals will tell their young professional clients not to use their credit cards but rather save, save, save. This is simply not realistic for our generation. We grew up with credit cards and rarely carry any cash at all. We don’t understand how to save, why we should save, the power of saving, and then what we should do with our savings to begin to build a strong financial foundation. My message to young professionals is to use your credit cards but don’t abuse them. Craft a comprehensive budget for ALL your monthly expenses, that includes your $50 a week drug store purchases, your $100 a week eating out expenses, and your $30 a week coffee expense. When your budget is finalized take your remaining money at the end of the month and put half into your savings account and use the other half for your fun money. Everyone needs to have a little fun!

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