Written by Kevin Payne 

Credit cards can be a useful tool to help you make purchases or pay bills instead of using cash or a check and paying them off later. Some credit cards reward card spending, earning cash back or points and miles you can use toward travel, online shopping, and other rewards.

 They can also be risky to use, especially if you don't have the money to pay off your balance. Improper credit card use can get you into debt and potentially hurt your credit. Knowing how and when to use credit cards will help you build credit and keep you out of debt.

How To Leverage Your Spending On Credit Cards

Many credit card companies offer credit cards that earn rewards for card spending. These cards are often geared toward travelers and financially savvy individuals who are looking to leverage their spending habits to earn something in return. Some cards earn points and miles you can redeem for flights, hotels, rental cars and other travel expenses. Others allow you to use points when shopping online or for gift cards to popular retailers. Some cards pay back card spending in the form of cash back rewards, putting money back in your pocket. 

Many rewards credit cards feature sizeable welcome bonus offers if you meet the spending requirements within a given period. Earning a welcome bonus can help you quickly boost your points balance. You can also boost your points total by choosing reward credit cards that align with your spending habits. Many cards offer bonus rewards in specific categories, like travel, dining, groceries, or fuel. Getting a card that earns bonus points or miles where you spend your money will help you earn points at a higher rate. 

If you decide to enter the world of credit card rewards, be sure to use your cards responsibly. Carrying a balance month to month leads to costly interest charges, which undermine rewards earned from your spending. Some cards have annual fees, which can also lessen the value of your rewards if you don't spend enough. Find cards that align with your spending habits and offer other benefits that outweigh the cost of the fee. 

How To Leverage Debt

Depending on the type of debt you have, it could be to your advantage to extend payment and use those funds to grow your retirement and investment portfolios. Not all debt is bad. Certain types of debt can harm your credit and wreck your finances. Some debt, though, can help you build long-term wealth. If you have low-interest debt, for example, instead of tapping into your finances to pay off your debt quickly, you could continue to make minimum payments and invest those funds instead. 

According to Fidelity, the average annual return on stocks over the past decade is 13.8%. According to Bankrate, S&P 500 index funds have a long history of earning around 10% annually.

While there's no guarantee that you will earn a return, there's also a chance you will earn more than the money you would save by paying off your debt early. Also, investing now allows you to take advantage of the power of compounding, which can help your investments grow quickly. 

Spending Mistakes To Avoid

Not only can you leverage your savings to benefit you, but it's also imperative that you avoid certain financial mistakes that can ruin your spending plan. Here are some common spending mistakes you should avoid. 

Spending more than you earn

A surefire way to get yourself into debt trouble is to spend beyond your means. If you're overspending, try to cut back on nonessential spending and impulse purchases. Work to stay within your monthly budget or spending plan. Cutting back on expenses, even temporarily, can help you get your finances back in order and pay off debt. 

Not paying off your credit card bills each month

Do yourself a favor and only use credit cards to the point that you can pay off the statement balance in full each month. When you carry over a balance, credit card issuers charge interest fees on the remaining balance. Accruing interest on your card balance can make it more challenging to pay off. 

Not tracking your spending

One of the best habits you can develop to stay on top of your finances is to track your spending. To do this, review the last few months of your credit card and bank statements. Look for spending trends outside of your budget and areas of spending you can either eliminate or cut back on to save money. Budgeting apps allow you to track spending automatically by linking your financial accounts to the app. 

Not saving for emergencies

Everyone should have an emergency fund. An emergency fund is savings set aside to cover unexpected expenses that can wreak havoc on your monthly budget. It's not a matter of if emergencies will occur. They will, and if you don't have an emergency fund set up, you could end up covering the expense with a credit card or income earmarked for other expenses, putting you in a hole financially. Aim for at least six months' worth of living expenses. Ideally, you should keep enough in your emergency fund to provide peace of mind.