How should you handle a credit card to build good credit without incurring high-interest debt?

• A. Use it for small, scheduled purchases and pay the balance in full each month.
• B. Carry a balance to show activity.
• C. Avoid using it entirely.
• D. Make only minimum payments.

Answer: (A)

Building good credit comes from showing you can manage credit responsibly: paying on time and keeping debt under control. Using a credit card for small, regular purchases and paying the full balance each month demonstrates consistent, timely payments while avoiding interest. When you pay the balance in full by the due date, you’re not carrying any debt, and your activity helps establish a solid payment history and a lower credit utilization ratio (how much of your credit you’re using). Both of these factors help your credit score over time.

Carrying a balance to show activity can rack up interest and isn’t necessary to build credit. Avoiding usage altogether means there’s no payment history to help your score. Making only minimum payments keeps you in debt longer and can keep a high balance relative to your limit, which can harm your score.