Credit cards are great tools for building positive credit ratings, but there are also several ways in which they can cause harm to our personal finances.  Millennials have an uncanny aptitude for technology and other such gadgets, but proper financial habits seem to have slipped through the cracks for many young people.

It is becoming a trend for Millennials to simply reject credit cards altogether.  What this group of young people has failed to realize is that not using credit is almost as detrimental as having bad credit.  Thirty-one percent of Millennials have never even applied for a credit card, and almost thirty percent have a credit score below 580.

Clearly, a few pieces of crucial financial information have been weeded out among generations.  Take a moment to look over what we deem to be some of the most important things to know when dealing with credit cards.

Credit scores are important, but not always the bottom line

Millennials typically confuse the real purpose and difference between credit scores and credit cards.  A great credit score does not necessarily mean a person has a healthy financial life.  It does mean that there is more of an opportunity to build personal debt.

Too often people use their credit just because it is available, and spending gets out of control.  Interest rates are too often overlooked, and then suddenly, the bills are overwhelming.  Credit cards should be respected and handled with care.

Avoid charging more than 30 percent of the maximum

Charging more than 30 percent of the credit card’s maximum line of credit can actually reflect negatively on a person’s credit report.  Maintaining a credit utilization rate below a certain percentage shows that a person is handling their gift of credit positively.

Just as maxing out a card is not a very good idea, opening up too many credit cards can also reflect on a person’s financial standings.  Limit the cards to two or three, and only use them in an emergency situation.  Alternatively, only spend what is feasible to repay at the end of the monthly cycle.

Pay off balances in full each month

It is always best to pay off the full balance of the card every month.  Allowing a balance to roll over to the next month will accrue interest quickly.  Even more, allowing a balance to roll over to the new fiscal year will result in even more interest additions.

Understand the difference between secured and unsecured credit cards

A secured credit card is typically more suitable for those who have less than perfect credit and those who are young with almost no credit.  This type of credit card requires the cardholder to pay a deposit before they are granted use of the card.  It is similar to a prepaid card.

An unsecured credit card is what most people think of as the more traditional definition of a credit card.  The cardholder is granted a certain amount of credit, without paying a cash deposit.