I prefer credit cards over debit cards and have never missed a payment. Is this the right way to use them?

A Reddit user has a question about whether he’s using his credit cards the right way. He’s only 21 and is turning 22 next month. He makes $45,000 per year, but he has a substantial amount of available credit with a total of two cards that have a $16,500 credit limit. He wants to make sure he’s doing the right thing with the cards to set himself up for success. 

These are the poster’s credit card habits

The Reddit poster explained that he signed up for his first credit card with a bank when he turned 18 and never missed a payment. The card he initially signed up for was a secured card that he used to pay off his gym membership each month. He was then upgraded to an unsecured card, which he uses mostly for dining, gas, and travel. 

The poster also said he hates debt, he never buys anything he can’t afford, and he pays the bill in full each month. He doesn’t use the cards a lot, though, and it took him 1.5 years to earn just $50 in rewards.

Is he using his cards the right way?

The Reddit poster is doing two very important things correctly when it comes to his credit cards. He’s paying off the balance in full, and he is paying his bills on time.

Paying off the cards means he does not have to pay credit card interest, which is very expensive as cards charge an average interest rate of 21.37%, according to the Federal Reserve. The poster is also making payments on time, which is critical to building good credit, as payment history is the most important factor in your credit score.

The poster is also in a good position because he has a lot of available credit. Credit utilization ratio is one of the most important factors in your credit score, second only to payment history. It measures how much of your available credit you use. The more available credit you have that you aren’t using, the better that is for your score.

The only thing the poster really could change is that he could try to use his cards more often. That may seem like odd advice because credit card debt is not a good thing. However, you can use cards without having debt — as this poster is doing. And if you are responsible enough to pay your cards in full each month, then it makes good sense to charge as much as you can on the cards and earn the maximum rewards possible.

Since the poster only earned $50 in rewards in 1.5 years, he is probably not using his card as much as he should. He may also have the wrong card for his spending habits, as you ideally want to make sure the card you have gives you bonus rewards for the spending you do most. 

The good news is, there are tons of great cards out there, and the Redditor — and anyone else who wants to maximize rewards — should check out the best cash back credit cards to find one that is a good fit. Then, use the card for as many purchases as possible, while continuing to pay the balance in full and on time. This is the ideal way to use cards to both build credit and maximize the cash back on offer.