This Credit Card Trick Can Help You Build Credit -- Without the Risk of Debt

Using credit cards responsibly can be one of the very best ways to earn good credit. The two most important factors in determining your credit score are your payment history and your credit utilization ratio, which measures how much of your available credit you have used. This means if you get a credit card, charge a little bit on it, and pay your bill on time, you'll be well on your way to building a credit score you can be proud of.

Unfortunately, despite the credit-building benefits cards offer, many people are scared to use cards because they're afraid of ending up in debt. This is a valid concern, since cards have high interest rates (averaging 21.19% right now). And it can be easy to lose track of what you're spending and find yourself with a bill you can't just pay off from your checking account.

The good news is, even if you're scared you can't be responsible with a credit card, there's a way to use one to build your credit without risking going into debt. Here's what you should do.

Set up this simple system to use a credit card to build credit

If you want to use your credit cards to build credit and not risk debt, the trick is to find a way to "use" them without putting yourself in a position where you could end up spending more than you should.

Fortunately, there's a very simple way to do that, and you don't have to charge a lot on your cards, or carry a balance and pay interest, in order to build credit. Simply set up autopay to cover one or two streaming services that you're using already and have a recurring monthly payment for.

For example, if you have a $15.49 monthly Netflix charge, you can just make your credit card your Netflix payment method. Then, set up autopay to automatically make a credit card payment out of your bank account for $15.49 a month a few days before your credit card bill is due.

Each month, you'll have a charge go on your card and will make a payment, so your payment will be reported to the credit bureaus. Your utilization ratio will also be really low, even if you don't have a very high credit limit. If you charge just $15.49 a month, even if you have only a $500 line of credit, you'd only be using about 3% of your available credit. This number should be kept under 30% to get the best credit score, so you'd be in great shape.

Once you do this, you can store the card somewhere safe or even cut it up so you aren't tempted to use it for other purchases or bills. And you'll still get the credit-building benefits a card offers but without the risk of winding up with a big bill (and high interest charges). Just be sure to take a quick check at your statement each month to make sure the payment cleared as it should have.

Using credit cards wisely can have huge benefits

Trying this simple trick can go a long way toward helping you build credit, as payment history alone accounts for 35% of your FICO® Score and credit utilization accounts for 30%. Of course, credit cards do offer other benefits such as cash back or rewards points, but the rewards you can earn don't make up for any interest charges you'd have to pay. So, if you aren't confident you can use credit responsibly, taking this route is a good way to go.