Credit cards can seem scary. 

I was talking to my two nieces, 18 and 22, who surprised me the other day when they said they would never use a credit card. They pointed out the dangers of credit card debt, high interest rates and even the long-term impact of damaging your credit. 

I can't blame them. Many of us have heard horror stories about overwhelming credit card debt, which in the US hit $1.17 trillion overall this year. It's enough to scare anyone away. However, when used correctly credit cards can also be helpful financial tools that offer convenience and the chance to save on purchases. 

Credit cards can also help you build credit, which is essential if you want to apply for a mortgage or car loan someday.

So I'm here with three credit card nightmares — real-life stories that my online community shared with me — plus how to avoid them so you can apply for and use a credit card with confidence. 

1. Don't apply for a credit card for the wrong reasons

"I signed up for my first credit card my first week away at college ... for a free T-shirt. Schools would let them sign [freshmen] up on campus. I used it mostly to eat out at Red Lobster. It started a long relationship between me and high-interest credit that I literally didn't get out of until two years ago."

Though being tempted by a "free" gift or limited-time welcome offer sounds good, if you aren't prepared to use a credit card responsibly, it's best to walk away. 

Credit card offers, especially for first-timers, often come with perks that can distract you from terms that can be consequential if you overspend. But it's important to know the basics for your first credit card. Every month, your card issuer will send a statement balance on a predetermined date. This accounts for all purchases you've made until this date, and you'll need to pay it in full on your due date to avoid interest. 

There's also a minimum amount you can pay to keep your account in good standing, but you'll still owe interest on the remainder if it isn't paid by the due date. If you don't want to get socked with a huge bill on your due date, it's best to pay down your balance before the statement date.

Once you're approved for a card, it's easy to get stuck in a cycle of high-interest payments if you weren't ready to pay your balances in full in the first place. And pouring your money into credit card debt takes away from other plans you have for your funds. 

When considering getting a credit card, ask yourself, "Do I need it, and what's the catch?" And stick to the golden rule of credit cards: Only charge what you know you can pay back, ideally that same month. Don't let "freebies" cost you more than they're worth.

2. Read the fine print 

"I signed up for a credit card with 0% interest for a certain amount of time. I spent $5,000 and paid off $4,500 thinking, 'Interest on $500 isn't that bad.' But when I didn't pay it all down to $0 before the term deadline, I was whacked when they charged me 20% interest for the full $5,000."

This is a case of not reading the fine print. Many credit cards that offer introductory 0% APR for new purchases or balance transfers only start charging interest on the remaining balance when the introductory period ends. 

But some financing options — often called a similar name, like 0% financing or no-interest financing — may start charging interest on the original amount borrowed if you don't pay off the full balance by the end of the introductory period.

And if you miss a payment on any offer, your card issuer may immediately end the promotional financing period and start charging you a much higher penalty annual percentage rate. Plus, you'll likely incur late fees.

The lesson here is: Always read the fine print and ask questions before applying for a new card. For example, "Will I be charged interest on the whole balance if I miss the deadline?" or, "Are there any additional fees or penalties I should know about?" 

If you apply for one of these offers, have a payment plan ready to pay off your balance on time and stay clear of fees. Put the offer end date in your calendar as a reminder of your target to pay off your balance. This way, you'll enjoy the perks of 0% interest without winding up in debt. 

3. Don't let a credit-limit increase lead to overspending 

"They increased my credit card limit out of nowhere. So I used my credit card more, and got plunged into more debt that felt impossible to get out of."

Credit card issuers may increase your credit card's limit after you update your income or because you've been using your credit responsibly. That credit limit increase can feel like a reward, but it can also tempt you to overspend. A higher limit doesn't make debt more affordable, just easier to rack up.

Instead,pretend that your credit limit didn't change. Generally, experts say you should keep credit card balances at or below 30% of your limit, but I aim for 10% to 15%. This habit helps you keep your credit score in check and builds a buffer you may thank yourself for later. 

So if your credit limit is $2,000, try to keep your balance below $200, even if the issuer bumps your limit up to $3,000. As a bonus, reducing your credit utilization may actually boost your credit score without you needing to change your spending behavior.

Credit cards can be powerful tools when used responsibly. Always treat credit as a tool, not a ticket to "free" money. Avoiding these nightmares can put you one step closer to building a healthier financial future.

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