Credit cards are debated when it comes to their reputation. While some say that are a great resource for rewards and a way to build credit, others say they are a tool of temptation that will lead you in to debt.
Both sides can be true. If you don’t have a credit card but are wondering if it’s the next step you should take, it’s important to understand both sides of the story.
Of course, when it comes to credit cards, you should evaluate your own habits and temptations.
Why You Should Get A Credit Card
When you purchase something with a credit card, you are essentially taking on a short-term loan. IF you can pay that loan off at the end of the billing cycle (which is typically 30 days) then you won’t have to pay interest.
Where things get tricky is when you don’t pay anything on your billing cycle (or less than the full amount) and you start to accrue interest, which makes your balance more expensive each billing cycle.
However, credit cards have become a very common thing when it comes to financial life – and it’s beneficial to have at least one. When you use your credit responsibly, it’s one of the best ways to build a strong credit history. Having a good credit history will make it easier to get big loans for cars and mortgages. Having great credit history (missing no payments and having little to no reoccurring balance) will give you a lot of advantages in your future big purchases.
If you shop online, having a credit card is much safer against fraud than using a debit card. Similarly, if your debit card gets stolen, it’s much more difficult to receive those funds which were taken. Federal law, on the other hand, limits your liability to $50 per credit card if it’s stolen and used by an unauthorized user.
Pitfalls Of Getting A Credit Card
The dangers of getting a credit card are not to be overlooked. For some people, credit cards are temptations to frivolously spend money they don’t technically have. This leads to overspending, and not being able to catch up on their monthly bill. Interest rates on credit cards can be as high as 29% – causing someones credit card debt to become nearly impossible to catch up with, depending on how much was borrowed.
Another thing to consider is some users may be absent minded and forget to make their payments on time. This results in fees and interest. If you’re capable of paying your bills on time each month, this shouldn’t be an issue. Especially since almost all credit card companies have the option to do auto payments that withdraw from your checking account.
One of the biggest fears for people thinking about getting a credit card is the temptation to spend money they don’t have. If you’re not sure you can handle it, consider opening a credit card and leaving it at home. A couple of times a month buy a coffee or a magazine and then pay it off immediately, that way you are building credit responsibly. This will keep your account active without having the temptation of having it in your wallet to pull out whenever you want to impulse buy.
The bottom line is to consider all of the pros and cons – while there are cons to having credit cards, there are many pros, if you are willing to put in the work to be responsible with them. They are a great way to build up your financial future and prepare you for larger purchases such as a car and a mortgage.