Because of their seductive nature, and their high interest rates, credit cards are regularly maligned. However, there are some good points to credit cards – beyond the fact that they represent the easiest way to build a credit history. Credit cards are convenient, come with a number of purchase protections, and can even be used as financial tools if you have the right rewards program. Many people find that, used strategically, credit cards can be a great help to their finances. Here are 4 tips for using your credit cards strategically:

Tip #1: Create a Budget

The trap that many fall into is that they just swipe the credit card because it is convenient, without keeping track of what is being spent. Without the accountability, the credit card statement comes as a shock. Instead of viewing your credit card as a limitless fund, use basic budgeting principles, and track your spending.

Treat your credit card like you would a checking account. Have a budget for food, entertainment, transportation and other costs, and when you spend money, enter the amount in your personal finance software. This way, you will be more likely to live within your means as you use your credit card.

Tip #2: Choose Your Rewards Carefully

Consider the rewards program that comes with your credit card. You want to make sure that it is a rewards program that you can use, and that offers you the best benefit. If you don’t travel much, a miles rewards card isn’t much help. However, if you drive your car a lot, a gas rewards card might be a good fit. Decide whether cash back, travel rewards or merchandise would offer the best rewards for your needs, and then make use of the cards that best meet your needs.

Also, check for restrictions, redemption fees, and other problems that could lead to a reduced value for your credit card.

Tip #3: Have a Plan for Each Credit Card

Know why you have each card. Maybe you have one old credit card that you got in college. This card may not have a rewards program, but you have had it so long that it is helpful in terms of showing a lengthy credit history. You want to keep that credit card open, so every couple of months, you should use it to buy something, and then pay it off. You want it to remain active so that it continues to provide positive help to your credit score.

You can also assign different types of purchases for different credit cards. Perhaps you can make all of your online purchases with a rewards card that builds up college savings for your child, or buy all of your groceries and pay your bills with your airline miles card so that your rewards add up faster. Each credit card should have a purpose, and you should adhere to it.

Tip #4: Avoid Carrying a Balance

One of the most important things to do is to avoid carrying a balance. High credit card interest rates mean that carrying a balance can negate any positive effect that you are enjoying from rewards programs. A card with a 13.99% interest rate is going to completely overwhelm a card that offers you 3% cash back. Travel rewards aren’t worth the cost of interest, either. Make sure that you aren’t running up large balances just for the rewards; you will find that rather counterproductive.

Bottom Line

Credit cards can be powerful financial tools. When used right, you can parlay them into free items, cash back and even a better credit score (saving you money in interest). However, like all tools, if you use them irresponsibly, credit cards can quickly become a problem.

Nathan Richardson

Nathan Richardson is a bank rate, and personal finance tracking site. Find high yield savings accounts or the latest answer to your personal finance questions.