How to Overcome Your Credit Card Fears

Debt running wild can certainly be a scary thing. Americans are facing a record level of indebtedness, with balances having risen continuously over the past three years to $12.8 trillion, as of June 30, 2017, according to the Federal Reserve Bank of New York. Credit card debt alone totals about $780 billion.

"People have lots of debt, whether it's student loan debts or other types," says Matt Schulz, CreditCards.com's senior industry analyst and former U.S. News My Money contributor. "And the last thing they want to do is expose themselves to more potential debt."

No wonder 41.2 percent of millennials think using a credit card is scary, according to a new survey from LendEDU, an online marketplace for loans and other financial products. The Great Recession taught them to see debt as "something that can really hurt your life," says Nate Matherson, co-founder of LendEDU. "That mentality has stayed with millennials having seen it that way growing up."

[See: 12 Habits to Help You Take Control of Your Credit.]

Still, even as this apprehension of credit cards is understandable, it also might be unwarranted. After all, it's not like credit cards are sneaking into your wallets and wreaking havoc on your finances behind your back. You can absolutely control credit card debt and how it fits into your life and budget.

"Credit cards and credit card issuers are unfairly vilified by many of the so-called financial celebrities and experts," says John Ulzheimer, credit expert formerly of FICO and Equifax, in an email. "If you use [credit cards] properly, then they offer the best terms the credit world has to offer."

That's good news because a credit card can actually be a very helpful financial tool. And many people recognize that. In the same LendEDU survey, 69.4 percent of respondents report that the reason they have a credit card is to build a credit history, and 13 percent say they want to earn rewards on their purchases.

Indeed, no matter how wary you are of credit cards, avoiding them might not be the best move for your finances. "If you stay completely away from credit cards, you're missing the simplest way to build your credit over time," Schulz says. "And the better your credit is, the more money you'll save over the course of your life in the form of interest rates on mortgages, car loans, credit cards -- that sort of a thing."

So how can you use credit wisely and reap the rewards of card usage without falling into a spiral of overspending?

[See: 12 Simple Ways to Raise Your Credit Score.]

Start small. Both Schulz and Ulzheimer suggest going with a secured card when you're just starting out. The way these cards work is you give a cash deposit to the lender, and that amount -- typically just a couple hundred dollars or so -- becomes your credit limit. Then, you use it just like a standard, unsecured credit card, and it helps you build up a credit history and score. But if you miss any payments, the card issuer can tap your original deposit to settle the balance.

"It's almost like a credit card with training wheels," Ulzheimer says. "If you find yourself constantly maxing it out with purchases that you know to be frivolous, then a full-blown unsecured card isn't for you. If, however, you find yourself buying things you know you're going to buy anyways, then perhaps you're ready for an unsecured card with a higher limit."

Pay off your balance in full every month. To do this, you need to stick with a budget and not look at your credit limit as an extension to your income. In other words, don't charge what you wouldn't be able to pay in cash -- which is easier said than done because the temptation to swipe is real. "There's been study after study that has shown that when you spend with credit cards, you tend to spend a little more than you would if you were paying with cash," Schulz says. "It's important to be very mindful of your spending," especially when you're using credit cards.

If you keep a tight budget, accounting for every cent spent, try tracking credit card charges the same way you would purchases made directly from your checking account. That way you know you'll have enough in checking to cover the full balance of your card.

Also consider setting up an automatic payment to pay off your credit card entirely every month. Knowing that's in place can make you think twice before swiping.

Or if you know you really can't trust yourself, go ahead and put the card away. You can still use it by assigning it one small monthly purchase for, say, your Netflix or Hulu account, that will charge automatically. Then set up your credit card payment to cover the full balance every month. Without ever seeing the card and being tempted to overuse it, you can still reap the benefits of building up your credit history and score.

[See: What to Do If You've Fallen (Way) Behind on Your Credit Card Payments.]

Educate yourself. It's easy to be scared of things you don't understand. In fact, Matherson blames people's fear of credit cards, in part, on a lack of education. "Millennials, whether they're graduating from college or just graduated from high school, often they were not educated in any formal way on how to use a credit card responsibly, how to open up a bank account, how to check your credit score," he says.

But you don't have to stay ignorant about personal finance topics in general. "Whether you go to LendEDU or to one of LendEDU's many competitors, there is an incredible amount of high-quality information online," Matherson says. "Just get started by Googling. Everything you could want to learn about your finances is out there."

And when it comes to credit cards specifically, make sure you get to know the terms, including the interest rate, credit limit and various fees you may get charged. You can find the right credit card for you, one that you can keep without fear.

"It's important that people ask themselves two basic questions [when picking a credit card]: How would you use the card? And what do you want to get from it?" Schulz says. "It really is about seeing how these cards fit into your lifestyle and figuring out how you can make the most of them."

Stacy Rapacon is a North Jersey-based freelance writer, who covers personal finance, investing and careers. She began her work in service journalism as a reporter at Kiplinger's Personal Finance magazine in 2007. In 2010, she moved into the digital space to became an online editor for Kiplinger.com and most recently served as managing editor of the site's Wealth Creation Channel. In addition, her work has appeared on CNBC, Grow, Business Insider, Yahoo and other publications. You can find her on Twitter at @srapacon.