Clark Howard: My 7 Rules for Using Credit Cards


Credit cards can help you build credit, but there are a few rules you must follow to avoid going into debt.

Money expert Clark Howard says that without credit, you could be punished in many areas of your life: Higher interest rates on loans, more expensive insurance premiums and denied employment if a company checks your credit report.

In this article, we’ll review Clark’s credit card philosophy and how to use plastic the right way. Let’s get started…

1. Have at Least Two Credit Cards

How many credit cards are in your wallet? Clark recommends that you have two credit cards for a mix of credit, which is an important component of your overall credit score.

He says those cards should be from two different issuers, like Citi and Chase.

“If we hit a recession and credit card companies decide they don’t want you and one of them dumps you, you still have the other card. And if one of them cuts back your limit, you still have the other card.”

For couples, Clark says it’s important to have two credit cards per individual — not household.

Once you have two credit cards from different issuers (Citi, Chase, etc.), you may decide to apply for additional cards — even from the same issuer. Clark has four personal credit cards.

2. Keep Balances Low and Pay Credit Cards Off Monthly 

No matter the number of credit cards you have, you ideally want to keep your balances low and pay them off in full every month. Payment history and amounts owed make up a combined 65% of your FICO score.

Those who don’t carry a balance won’t pay interest charges and should focus on the cards that offer the best rewards.

A 3D pie chart calculating the 5 categories that make up a credit score including 35% for payment history, 30% for amounts owed, 10% for credit mix, 10% for new credit and 15% for credit history
5 categories that make up your credit score

3. Go With a Cash Back Credit Card

When you’re comparing rewards credit card offers, Clark says simple cash back cards like the Citi Double Cash Card are best. This card offers up to 2% cash back: 1% when you buy and 1% as you pay.


Rewards cards that offer rotating 5% cash back categories are often too complicated to keep up with, Clark says.

As for travel rewards credit cards, Clark says you have to carefully consider the annual fees and whether you charge enough to justify the cost. That’s just not the case for most individuals.

However, if you fly a particular full-fare airline regularly, the lowest-tier annual fee card may be worth considering.

4. Know Your Interest Rates 

If you can pay off your balances in full every month, your interest rates don’t really matter. You won’t pay interest. But if you think that you’ll have to carry a balance, you really have to know your interest rates.

When reviewing credit card offers, consider a low-interest card from a credit union. Some offer rates around 10%.

If you aren’t looking to obtain a new credit card, call your issuer and ask for a lower interest rate. This could save you a lot of money while you work toward paying off that debt for good.

5. Don’t Use Balance Transfer Cards for New Purchases

If you apply for a balance transfer credit card with hopes of getting out of debt quickly, don’t use that card for new purchases. You can’t get out of debt if you keep adding to it.

Learn more about balance transfer credit cards and the mistakes to avoid in this article from credit card expert Beverly Harzog.

6. Keep Old Credit Card Accounts Active

Do you have credit cards in the back of your wallet that you never use? Clark says that if you don’t keep your accounts active, your card issuer may decide to close them for you.

Here are two simple ways to keep your cards active:

  • Set a calendar reminder to use your card at least once every six months.
  • Make a small recurring purchase and set up automatic payments.

7. Avoid Closing Credit Card Accounts 

Clark says it’s usually not a good idea to close or cancel a credit card account. The reason? Closing a credit card account, especially one with a high credit limit, may hurt your credit score.

On the other hand, it may be worth it to close a credit card account with a high annual fee if you’re not getting the benefits.

Before you call your credit card issuer to cancel one of those cards with an annual fee, ask for a retention offer or see if you can be downgraded to a version of the card with no annual fee.

That way, you may be able to avoid the annual fee and any negative impact on your credit score.

Final Thought 

If you follow Clark’s rules and use credit cards responsibly, you’ll build a good credit score that will benefit you throughout your life.

However, Clark wants you to know that credit cards aren’t for everyone. If you know that you’ll use any credit you may get and not be able to pay back your debts, live on a cash basis.

“Studies show that if you have a tendency to spend more money than you like, forget all rewards credit cards and just live on cash. You’ll have the greatest reward you’ll ever have: greatly reduced spending.”

To learn more about credit cards and your overall credit, see our list of ways to increase your credit score quickly.

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