My relationship with credit cards has gone through its ups and downs ever since I applied for my first credit card at 19 years old. The honeymoon phase abruptly ended just months in as interest charges piled up after debt balances.

Fortunately, those days have long passed. I've learned several key things as my relationship with credit has become more fruitful, after nailing down an approach that helps me stay on budget while harvesting a ton of value from card rewards and credit card sign-up bonuses.

I've held 21 credit cards throughout that journey, and here are some key lessons and tips that I've learned along the way.

Wallet full of credit cards

Image source: Getty Images

1. Keep track of your credit score

Credit scores may be the most important three-digit number in our financial lives that the majority of Americans don't know about. In fact, research shows that 59% of Americans don't know their credit scores, according to LendingTree research.

The lowest mortgage rates, best auto loan terms, and best credit cards are typically reserved for people with excellent credit. While securing a 1.50% lower mortgage rate than someone with poor credit might not seem like much, the total costs of a 30-year mortgage can be tens of thousands of dollars cheaper.

This is just one example that highlights the importance of taking action to improve your credit score. Maintaining a budget is a function of managing costs, and staying on target becomes difficult with high borrowing costs and poor credit.

2. Embrace balance-transfer credit cards

Balance-transfer credit cards are powerful tools to get out of credit card debt. They're a strategy I embraced after ending up in debt early on.

Indebted cardholders could hypothetically save $2,987 on interest charges paying down a $10,000 balance with a balance-transfer card with a 0% intro APR over 15 billing cycles.

Let's dive into some calculations to better understand the savings.

  • The cheap option, with a 0% intro APR: It takes 37 monthly payments of $300 to wipe out a $10,000 card balance on a balance-transfer card with a 0% intro APR for 15 billing cycles, assuming the APR after the promo period is 18%. Total interest charges will amount to just $980 over that span.
  • The expensive option, without a 0% intro APR: It takes 47 monthly payments of $300 to pay off a $10,000 card balance at an 18% APR. Interest charges tally to a staggering $3,967!
Chart comparing interest charges with or without 0% APR.

Assumes 18% non-intro APR, $300 monthly payment, 0% intro APR for 15 billing cycles. Chart by author.

Not only does this save thousands, but the strategy also helps pay off balances 12 months faster. Consider some cards on our list of the best balance-transfer credit cards if you're carrying some credit card debt.

Of course, there are credit score implications to paying off debt as well. Credit utilization (debt divided by available credit) influences 30% of your FICO credit score. Getting out of credit card debt sooner will improve your credit score faster as your utilization ratio is drawn down.

3. Stick to no more than two credit cards

Keeping one card in your wallet may actually be the best option for many, especially people who are prone to blowing through even the most carefully orchestrated budgets.

Carrying multiple cards introduces complexity to your finances. Complexity begets mistakes. And with credit cards, the unfortunate likely result of misuse is piling on high-rate debt.

Experience has taught me that the more cards I carried at a single time, the more likely I was to overspend my allotted budget. What's more, managing expenses and bills across numerous accounts requires time, which is in short supply. I prefer to spend my time elsewhere.

4. Flat-rate cash-back cards are the Swiss Army knives of credit cards

Continuing the "keep it simple" theme, many rewards cardholders will be best off simplifying their finances by carrying a single flat-rate cash-back card, rather than a wallet packed with cards, each offering bonus rewards in niche categories that don't comprise the majority of their budgets.

Again, the latter approach complicates finances, and the incremental benefits from stretching rewards may not be worth the time required to manage that credit card.

For example, a cardholder spending $100 per month on gas and earning 5% cash back in that category will net $60 annually, versus $24 for a card earning 2% cash back for all purchases. Perhaps the extra $36 earned on the bonus cash-back card is worth it to you. No doubt I'm leaving money on the table carrying one card that's a fit for all my needs, but the return on time for carrying an extra card and managing it doesn't work out in my favor.

5. Avoid debt if you want to have any chance of building a nest egg

As investors, success is defined as beating the long-term rate of return of the stock market, which has approximated 8% over the past decades. Even small outperformance, compounded over decades, can mean hundreds of thousands of dollars more for your nest egg after 30 years of successful investing. Every percentage point matters.

With credit card debt, the same is true, but credit card companies are the ones harvesting the returns, commonly at rates more than doubling 8%. We Fools would drool over earning such high rates of returns for stocks.

It's important to keep in mind that banks are earning that sky-high return at your expense when you carry debt, and it's delaying your ability to start chipping away at your retirement goals. Every year counts.

6. Pay off balances every 10 days

I pay off card balances on the 10th, 20th, and last day of each month, in addition to setting alerts that notify my wife and me when balances have surpassed a set threshold. Some might consider this overkill, but the reason for doing so isn't an obscure strategy to boost my credit score.

Paying off balances frequently ensures our daily spending behaviors are aligned with longer-term goals. It's also helps when we blow through money early in the 10-day period. It's much easier to penny-pinch for eight days after two days of overspending versus having to do the same for 20 days, after 10 budget-busting days.

7. Blame your brain, not credit cards

Credit cards aren't to blame for their potentially dangerous effects. Scientifically, our brains are the real problem.

Paying with cash triggers dopamine activity in our brains, and this explains why we actually feel a sense of pain when cash is removed from our pockets, or the stress we feel when reviewing our plundered bank account balances.

With credit cards, that crucial link between brain activity and losing money is broken. The stress later hits after the bill comes due and the damage is already done.

8. You can avoid paying a late payment fee

Credit card legislation arising from the 2008 financial crisis has led to more lenient fees from issuers. One such fee is for late payments. All cardholders are legally obligated to waive one late payment fee per calendar year. Simply call your issuer to request the waiver.

9. Don't let your credit score keep you from applying for a sign-up bonus

Credit card issuers are willingly handing out large credit card sign-up bonuses to attract new cardholders, but some people shy away from a bonus fearing the negative impact to their credit scores following a hard credit inquiry. This thinking is short-sighted.

True, your credit score will generally decline 5-10 points with a hard inquiry. But credit scoring models want to see a history of on-time payments across cards and loan types, in addition to a low credit utilization ratio. Signing up for a new card can favorably influence both, assuming payments are made on time and the newly available credit is utilized minimally. It's not uncommon to see your credit score rebound within months of applying, and perhaps improve in the future just for applying for a new card and managing it well. My FICO score now sits at 824, even after having held 21 credit cards.

But keep in mind, there are benefits to establishing a relationship with your card issuer, so churning offers and ditching the card is not ideal behavior.