Credit is one of the most misunderstood parts of financial planning. Most of us aspire to retire free of debts; at the same time, we know that using credit can be important for many reasons. A good credit score saves you money on everything from mortgage rates to car insurance, so you don’t want to neglect to use credit at all. What’s the middle ground?

Credit card debt surpassed 1 trillion dollars in 2017*, and probably won’t decline any time soon. The average household holds $16,883 in credit card debt, and pays $1,292 annually just in interest. Credit utilization is one thing, but imagine if you put that $1,292 into a retirement savings account instead!

Clearly there is a difference between using credit productively, and hurting your own bottom line. Here are five things you need to know about credit cards, to begin to revamp the way you use them.

Don’t carry a balance unnecessarily. Occasionally an emergency or large purchase is unavoidable. But in many cases, credit card debt results from impulse spending or overestimating your budget (and the amount you can repay at the end of the billing cycle). Here’s a good rule of thumb: If you don’t have the funds in your checking account, you probably shouldn’t be purchasing that item on a credit card.

Don’t fall for every rewards program offer. Credit overuse also results from simply holding too many store cards. Many of those rewards programs aren’t all that beneficial. Do your research and choose two to three credit cards with truly great rewards programs – like 2 percent cash back overall, or 5 percent cash back in rotating categories.

You can negotiate. If you ask, credit card companies will sometimes waive your first late fee, or even the annual fee, especially for long-time, loyal customers.

Pay attention to terms and conditions. A card might sound great upfront, but certain limitations apply to benefits like 0-percent APR, certain fees, or balance transfers. Investigate thoroughly before signing on with a particular card company.

Transfer high-balance cards, or consider consolidation loans. You don’t have to pay that ridiculously high interest rate forever. Look for 0-percent or lower-percentage balance transfer options (while watching for fees), or consider a consolidation loan to get those cards paid off for good.

Your credit score will continue to be important as you head into retirement, so protect it! And as you pay off those credit card balances and free up extra cash in your budget, remember to meet with us about ways to use those funds as a part of your retirement plan.