Credit Cards!
A credit card is sometimes a necessary evil. When used properly, a credit card is simply another tool in the toolbox. So, how do you know if you need one? Well, it is important to first understand how a credit card works. If you do not understand credit, it can get you into big trouble. Do your research before you start applying for credit cards to make sure you start to understand how to use them to your benefit.
If you are having concerns, there is no reason to rush into getting a credit card, but if you think you can handle it, go for it! Here are some signs you are ready:
- You regularly pay your bills on time.
- You control your spending and have a budget.
- You don’t spend more than you can repay.
So, you are still on the fence? There are many reasons for and against having a credit card. Especially when you are young, you may think you do not need one. However, you might want to consider these pros and cons before making your decisions.
PROS
Build Credit History
This one is kind of tricky, you must go into debt to build your credit. If you want a mortgage or a car loan in the future, you must start building your credit history. The best way to do this is to open a credit card and put a simple recurring expense on it and then pay it off at the end of each month. When I started, I used my card only for gas, something I needed anyway, and used my credit card to start building up my credit history.
You don’t have to carry cash
This benefit is one of my personal favorites, if you are traveling overseas or in an area you aren’t familiar with, a credit card is a safe spending option. Withdrawing cash from ATMs comes with a lot of fees, especially in foreign countries. Using your credit card, you do not have to worry about getting cash, plus, there is often extra protection given by the credit card companies. Card carriers are protected from liability on most cards and there is an option to turn your card off if it is ever lost or stolen.
You earn cash back and travel rewards
Once you are comfortable with using your credit card, you can take advantage of cards that offer cash back or travel rewards. Credit cards offer benefits that can lead to extra statement credits or even free flights. When you are looking at upgrading cards to start getting some of these rewards, make sure to do your research. Every card offers something different, so you must pick the one that suits your needs.
CONS
Overspending
By far the hardest part of your first credit card, you suddenly have access to a lot of money. As an eighteen-year-old you could suddenly have access to credit up to a couple thousand dollars. You must make sure you only spend what you are able to repay. Only you know what you can handle so before you get your first card make sure that you can make the payments.
Anxiety of one more bill
When it seems like you are drowning in bills, a credit card is the life raft above the surface. Until it isn’t. A credit card quickly goes a saving grace to another trap filled with monthly payments and a ridiculous interest rate. While credit cards can be great, they must be used very carefully.
Extra Responsibility
If you don’t understand the world of credit and credit cards, you might want to slow down. There is a lot that goes into how to use your first credit card. If you get a credit card and start using it wrong, it could be a nightmare for your credit score.
