How to use credit cards and never pay a penny in interest

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Credit card tend to get bad press. And some financial experts, like David Ramseyinsist that they be avoided at all costs.

But the reality is that credit cards can do a lot of good things for you. First, they tend to reward consumers for their purchases in the form of cash back. Second, they can come with money-saving perks, like free checked bags on flights (a perk you’ll typically find with a travel rewards card).

Plus, credit cards can actually help you build credit. If you pay your bills on time, this positive activity will show up on your credit report, which could lead to an increase credit score. And the higher that number, the less it will generally cost you to borrow.

But while credit cards can work to consumers’ advantage, they have one major drawback. If you don’t pay your balance in full by its due date, you risk accumulating interest on your purchases, interest that costs you money.

The good news, however, is that it is possible to use credit cards regularly without paying a penny in interest. All you need to do is this one thing.

Set your own spending limit

When you get a credit card, it usually comes with a spending limit based on a formula that its issuer will use. This formula will take into account factors such as your income and credit score.

But the spending limit you get on your credit cards may not be the spending limit your monthly paychecks can support. And so, if you want to avoid a scenario where you’ve built up a balance that you can’t pay off in full, crunch some numbers to see how much you can afford to charge your credit cards each month.

You may have three separate credit cards, each with a $2,500 limit. But that doesn’t mean you can afford $7,500 in fees every month. Heck, you might not even be able to afford to max one of those three cards. So rather than relying on your credit card spending limits, set your own.

Budgeting will help

The best way to see how much you can afford to charge to your credit cards is to put yourself on a budget. Once you’ve tallied up expenses like rent and car payments, which are usually debited from your checking account, you’ll see how much you can afford to spend on other bills, whether it’s cable , groceries or social activities. This should help you set a spending limit that will allow you to pay off your credit card balance in full each month, avoiding interest charges.

Another good bet? Give yourself a buffer for unexpected bills. You might do your math and find that you can swing $2,000 in credit card fees a month without having to carry a balance. But you might want to lower that limit by $200 or $300 to give yourself a cushion for unexpected things like car repairs or higher-than-expected utility bills.

Paying interest on your credit cards is like throwing away money. But if you’re careful to set yourself a spending limit, you could benefit from credit cards for years without paying any interest on your purchases.

Check out The Ascent’s best credit cards for 2022

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