Here are 5 pieces of credit card advice that financial advisors are giving their clients in 2021

Credit cards are one of the most versatile financial tools to use for managing your money. When used responsibly, they can help you improve your credit score over time. And they can also save you money when you use your card to earn cash back or accumulate points for free flights, other travel expenses and more.

However, it can be really easy to misuse them. And making mistakes with your credit cards can be very expensive.

Select spoke with financial advisors Danielle Harrison of Harrison Financial Planning and Bridget Mermel from Sullivan Mermel Inc. to get their best advice for managing credit cards. Here are five tips they share with their clients.

Understanding your goals will not only help you find a credit card that's just right for you, but it can also help you avoid wasting time and money on a card that doesn't suit your needs.

"I would encourage people to first figure out what goals they have in mind with getting a new credit card," says Mermel. "If you love traveling and want to earn points toward that, it would make sense to get a travel rewards card. Start by thinking about what you're looking for, and you'll be able to find a card that works for you."

Keep in mind that travel credit cards come with expensive annual fees, complicated rewards programs and usually require you to have an excellent credit score. So if you're more interested in the cash back aspect of rewards cards, there are simpler options out there.

If you don't want to pay for your credit card, look for one with no annual fee, like the Citi Double Cash® Card (see rates and fees) or the Chase Freedom Unlimited®.

Even without an annual fee, you still get a good perks with both cards. With the Citi Double Cash Card, you can earn 1% back on all eligible purchases and then an additional 1% when you pay your bill. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel^SM portal through 12/31/24.

The Chase Freedom Unlimited Card offers new cardholders earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back! New cardholders earn 6.5% cash back on travel purchased through Chase Travel, 4.5% cash back on drugstore purchases and dining at restaurants (including takeout and eligible delivery service), and 3% on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.

If you're just starting to build your credit, there are credit cards out there for you, too. You might want to consider the Discover it® Secured Credit Card or the Petal® 2 "Cash Back, No Fees" Visa® Credit Card. Both of these cards offer cash back and have no annual fee.

If you don't pay off your bill in full each month, you can get hit with high interest charges that can make it very difficult to get out of debt. The interest on your credit card is calculated based on your principal amount (aka your balance), plus any accumulated interest you already owe. So you're pretty much being charged interest on top of interest if you carry a balance from month to month and only make the required minimum payment.

Not paying off your credit card bill on time and in full each month can turn a strategic credit card offer — like spending a certain amount in order to earn bonus rewards points — into an expensive mistake.

"Do not put purchases on credit cards to get rewards points if you aren't paying off your entire bill monthly," Harrison warns. "The interest charges will easily wipe out any bonuses you received."

Of course, emergencies come up from time to time. But try not to reach for your credit card when they do.

When you use a credit card to cover emergency expenses, you'll accrue interest on the balance if you can't pay it off in full. Interest charges will make the emergency feel even more expensive. Plus, sometimes being stuck making payments for a long time can make you feel as if you'll never dig yourself back out of debt.

"When you use your credit card as an emergency fund and can't pay it off in full, it creates what's called debt drag because it makes people feel bad for having these balances," says Mermel.

Instead of relying on your credit card to cover surprise expenses, save up an emergency fund in a high-yield savings account. Experts typically recommend saving three to six months' worth of expenses in the account to use in emergencies.

Marcus High Yield Online Savings Account and Ally Bank Online Savings Account both offer higher-than-average APYs, so your money can earn interest, and you can build a fully-funded emergency account a little quicker.

Both experts agree that consumers should generally try to use a credit card for purchases instead of a debit card because credit cards offer more protections that can really come in handy.

For example, if someone steals your credit card info and uses it to make a large purchase (or even a bunch of little purchases), you can usually call your card issuer to report the fraudulent activity and have the charge(s) removed from your statement. Your card provider will usually deactivate the old credit card and send you a new one.

With a debit card, though, things get a little tricky. If someone makes unauthorized transactions with your debit card number (without actually having the card), you won't be held liable for any charges if you report them within 60 days of your next statement.

But if your debit card gets lost or is stolen, you need to act quick before someone uses it. According to the Federal Trade Commission (FTC), if you report your stolen or lost debit card before a fraudster can use it, you won't be charged anything. If the loss is reported within two business days, you can be held liable for up to $50 in fraudulent charges. But if it's been more than two business days but less than 60, you can be responsible for up to $500 in unauthorized transactions. And if it's been more than 60 business days when you report the loss, you could be responsible for all charges.

"Credit cards offer additional protection, give you a grace period on paying for the purchase and allow you to earn rewards points," Harrison says.

However, Harrison also cautions that while credit cards can be a useful tool, people who habitually purchase more than they can actually afford should use cash or a debit card instead. Otherwise, they will get hit with high interest charges, which could result in it taking a longer time to pay off their debt compared to someone who only spends what they can afford to pay for in cash each month.

Once you feel confident managing one credit card and using it responsibly, it may be a good idea to consider adding a second one to your wallet.

"I typically recommend having two credit cards: a primary card and a backup," Harrison says. "I've run into situations where a card hasn't worked, and you don't want to be stranded without another payment option."

Plus, adding another line of credit can actually help improve your credit score since it can increase the total amount of available credit you have and lower your credit utilization rate if you generally limit your spending to just one credit card. But again, only consider opening an additional credit card if you already have a strong handle on managing the one(s) you do have and making payments in full and on time each month.

Credit cards can be an exciting opportunity to improve your finances, especially if you're using one with appealing perks like cash back and travel rewards. However, in order to truly get the most out of your credit card, you should make sure you're managing it responsibly.

Knowing your goals for the new credit card can help you make sure you aren't getting swept up in the promise of luxury perks you won't really use.

Another big part of smart card management is knowing how much you can comfortably afford to pay off each month and making sure you don't spend more than that. By following these simple tips, you can get the most out of your card.

Information about Marcus by Goldman Sachs High Yield Online Savings has been collected independently by Select and has not been reviewed or provided by the banks prior to publication. Goldman Sachs Bank USA is a Member FDIC.

Petal 2 Visa Credit Card issued by WebBank.

For rates and fees for the Discover it® Secured Credit Card, click here