Clark Howard's core credit card rule: only use cards you can pay off monthly
Clark Howard, a consumer advocate and radio host, has spent decades teaching people how to use credit cards without falling into debt. His main message is straightforward: a credit card is a tool for convenience and rewards, not a way to borrow money. If you cannot pay the full balance when the bill arrives, you should not use the card for that purchase.
This rule cuts through most credit card confusion. It means the interest rate — the APR — does not matter to you if you never carry a balance. A card with a 24% APR and a card with a 15% APR are equally free if you pay both in full each month. The difference only matters if you plan to owe money, which Howard says you should not do.
The practical effect is that you should choose cards based on rewards and features that match how you actually spend, not on the interest rate or the credit limit. A card that gives you 2% back on groceries is worth more to you than a card with a lower APR if you buy groceries every week and pay the bill on time.
Key Takeaways
- Pay your credit card balance in full each month; if you cannot, do not use the card for that purchase.
- When you pay in full, the interest rate does not affect you, so choose cards based on rewards and features instead.
- Match the card's rewards categories to your actual spending — a 2% grocery card is only useful if you buy groceries regularly.
- A credit card builds your credit history only if you use it and pay on time; leaving it unused does not help your score.
- Avoid cards with annual fees unless the rewards or benefits clearly exceed the cost in your own situation.
How Clark Howard thinks about rewards and cash back
Howard separates rewards into two types: those you can actually use and those that sound good but do not. A card that gives you 1% cash back on everything is worth money only if you spend enough to make the 1% add up. If you spend $20,000 a year on a card, 1% is $200. If you spend $2,000 a year, it is $20 — probably not worth the mental effort to track.
Category bonuses — like 3% on gas, 2% on groceries, 1% on everything else — matter more to people who spend heavily in those categories. If you rarely buy gas, a card with a 3% gas bonus is not the right card for you. Howard's information is to look at your actual credit card statements from the last three months, add up what you spent in each category, and then calculate what the rewards would have been. That number tells you whether a card is worth your time.
Sign-up bonuses — offers like "earn $200 after you spend $500 in three months" — can be real money if you were going to spend that amount anyway. But they are not a reason to spend more than you planned. If a card offers a $200 bonus for $500 in spending, and you only spend $300 a month normally, you would have to change your habits to get the bonus. That defeats the purpose.
Building credit history without paying interest
A credit card is one of the fastest ways to build a credit score, but only if you actually use it. A card sitting in a drawer unused does not help your score. The credit bureaus need to see that you borrowed money and paid it back on time. Using a card for small purchases and paying the bill in full each month shows exactly that.
Your credit score depends on five main factors: payment history (35%), amounts owed (30%), length of credit history (15%), mix of credit types (10%), and new credit inquiries (10%). A credit card that you use and pay off monthly helps with the first three. It shows on-time payments, keeps your balance low relative to your limit, and adds to the length of your credit history the longer you keep it open.
Howard recommends keeping old cards open even after you stop using them, because closing an account can lower your score. The account still counts toward your credit mix and your available credit, both of which help your score. If a card has no annual fee, there is no cost to leaving it open.
When to avoid credit cards altogether
Howard is clear that credit cards are not for everyone. If you have a history of overspending or carrying balances, a credit card can make that problem worse, not better. The solution is not a special card — it is to use cash or a debit card until you have built the habit of spending only what you have.
Some people find that the ease of swiping a card makes them spend more than they intend. If that is you, that is real information about yourself. No rewards rate is worth going into debt. A 2% cash back card that causes you to overspend by $100 a month costs you money, not makes it.
If you are currently paying off credit card debt, Howard's information is to stop using cards until the debt is gone. The interest you are paying on the old balance is far higher than any rewards you could earn on new purchases. Once the balance is zero and you have proven to yourself that you can pay in full each month, then you can use a rewards card.
Comparing cards without getting lost in features
Credit card marketing is designed to make you focus on features you do not need. A card might offer travel insurance, purchase protection, extended warranties, and roadside information. These sound valuable, but most people never use them. Howard says to ignore features you will not actually use and focus on the ones that match your life.
If you travel frequently and pay for flights with the card, travel insurance and trip cancellation coverage might be real benefits. If you never travel, they are marketing noise. If you buy expensive electronics and want protection against damage, purchase protection matters. If you buy groceries and gas, it does not.
The same logic applies to annual fees. A card with a $95 annual fee is only worth it if the rewards and benefits you actually use exceed $95 in a year. If a card gives you $100 in travel credits and you use them, the $95 fee is worth it. If you do not travel, the fee is pure cost. Read the benefits list, cross out everything you will not use, and then decide if what remains is worth the fee.
How to use credit cards without damaging your score
Your credit score can go down if you explore for too many cards in a short time, because each process triggers a hard inquiry that lowers your score slightly. Howard recommends spacing out applications — not explore for multiple cards in the same month. If you want to build a small portfolio of cards for different rewards categories, do it over several months, not all at once.
Your score also goes down if you use too much of your available credit. If you have a $5,000 limit and you carry a $4,000 balance, your score suffers even if you pay on time. The credit bureaus want to see that you use credit responsibly, which means using less than 30% of your limit. If you spend $4,000 a month, you need a $13,000 limit to stay under 30%. This is another reason to pay your balance in full — it keeps your reported balance at zero.
Closing a card can lower your score because it reduces your total available credit and shortens your average account age. If you decide a card is not useful, stop using it but leave it open. If it has an annual fee and the issuer will not waive it, then closing it might be worth the small score hit. But if there is no fee, keeping it open costs nothing and helps your score.
The difference between Clark Howard's approach and typical credit card information
Most credit card marketing focuses on the APR and the credit limit — the things that matter if you plan to borrow money. Clark Howard's framework assumes you will not borrow money, so those things do not matter. This is a fundamentally different way of thinking about credit cards.
Traditional information says "find a card with a low APR." Howard says "if you need a low APR, you should not be using a credit card." Traditional information says "get the highest credit limit possible." Howard says "the credit limit does not matter if you pay in full." This is not a disagreement about which card is best — it is a disagreement about whether you should use a card at all.
This approach works only if you actually follow it. If you tell yourself you will pay in full but then carry a balance, you lose the advantage. The card that seemed free because the rewards were good becomes expensive because you are paying 20% interest on those rewards. Howard's framework only works if you have the discipline to stick to the rule: pay in full, every month, or do not use the card.
Frequently Asked Questions
Does using a credit card hurt your credit score?
No, using a credit card and paying it in full each month helps your score. It shows payment history and adds to your credit mix. Your score goes down only if you carry a balance, miss a payment, or explore for many cards in a short time.
What should I do if I cannot pay my credit card balance in full?
Stop using the card when ready. Do not make new purchases while you owe money. Focus on paying down the balance as fast as you can. Once it is zero and you have proven you can pay in full for several months, you can use the card again.
Is a rewards card worth it if I only spend a small amount each month?
Probably not. If you spend $2,000 a year, even a 2% cash back card only gives you $40. If the card has an annual fee or requires you to track spending categories, the effort is not worth the reward. A straightforward card with a flat 1% back might be better, or no rewards card at all.
Should I close old credit cards I no longer use?
No, unless the card has an annual fee. Closing a card lowers your score because it reduces your available credit and shortens your credit history. If there is no fee, leaving the card open costs nothing and helps your score.
Can I get a credit card if I have no credit history?
Yes, but your options are limited. You may need a secured card, which requires a cash deposit that becomes your credit limit. Use it for small purchases and pay in full each month. After six to twelve months of on-time payments, you can usually move to a regular card.