So how are most American's using credit these days? Unfortunately Americans are using credit to make themselves poorer instead of putting money back in their pocket. The truth is that all uses of credit are not created equally and it's important to understand that there are several different types of uses for credit. The good, the bad and the ugly.

Over the next few minutes I'm going to cover the different uses for credit and lay out a few simple guidelines so you can figure out what side of the spectrum you're currently on.

#1 - Using credit as a convenience.

Let's face it, pulling out that Visa or MasterCard for day to day purchases and all the bills that come with today's lifestyle is an awesome convenience and time saver. Especially when you have a 30 day window to make that one credit card payment without costing yourself any interest. By paying purchases and bills with you credit card and paying off your card every 30 days your cost of using credit is absolutely nothing and actually saves you time in the long run. Believe it or not these types of people do exist and are using credit in a beneficial way.

#2 - Using credit on long term purchases with little or no lasting value.

At some point or another we've all been guilty of it, spending money on meals, impulse purchases and frivolous things that have no lasting value and carrying a balance on our credit card for several months. Heck, there are even people out there who are thousands of dollars into credit card debt and can't remember a single thing they spent that credit on. What's even worse is now the original cost of those items has increased simply because of the interest rate. It should be no surprise that this is a negative way to use credit and when you use credit this way you are essentially pledging your future earnings to pay for things that have already been used up.

#3 - Using credit on purchases that last as least as long as the payments.

A good example of this type of credit is a car loan on certain conditions. Let's say you currently don't have a car but need to commute. You are spending $15 a day on transportation such as bus fares, taxi cabs, etc. After finally getting sick and tired of this type of commuting you decide to purchase an economical used car for $3,000. You find a low interest loan and figure you will actually be saving money on your car payment and fuel costs in the end. This would constitute a good use of credit because the benefits of the purchase you are making will outlast the payments. Notice though that I didn't say you go out and buy a brand new hummer on credit for $60,000. Obviously something like that would be frivolous and would not be a wise use of credit.

#4 - Using credit to invest.

Credit also provides us the means to access certain investments that wouldn't be possible without it. By using credit to invest in wealth building assets such as real estate and business opportunities we are using other people's money to start building our own long term wealth. So if you have a well thought out business plan or spotted a great deal on a prime piece of real estate, using credit to acquire these entities would actually be a wise use of credit. These types of purchase are different than the other categories we spoke of above because the items purchased for investment are expected to increase in value over time.

To wrap things up, credit can be dangerous or beneficial depending on how you choose to use it. Unfortunately financial education isn't something that is stressed enough in today's education system and that is why so many people use credit the wrong way.

So the next time you owe $1,000 on a credit card and are about to pull it out to pay for that pizza and beer, think again. No matter what credit use category you are currently in you're end goal should to increase your financial education, use credit wisely and eventually use credit to put money back in your pocket.