Do I Need a Credit Card
Is a Credit Card Something I Need to Have?
Have you ever wondered if you really need a credit card? I can hear some saying, this guy must be nuts, who can live without at least one credit card? There are some though, who are highly disciplined and won’t have a credit card in their wallet.
This can be a mistake, however, because with proper use of a credit card, you can build a strong credit score. We’ll give you some tips about credit cards and credit score, and for the very few of you, some advice to consider.
Do I really need to have a credit card?
We all have different wants and needs as well as personal lifestyles, so on to the answer to the above question. There are some who have managed their finances very well for many years and have not used a credit card. They don’t expect their situation to change, and have even saved a tidy sum for possible emergencies.
[bctt tweet=”How do some individuals manage to get along without a credit card?” username=”HBSMoneyTips”]
Perhaps they don’t need a credit card? But what happens when their emergency cash fund is depleted and suddenly some large expenses are staring them in the face? No credit history = no credit score = no loan or credit card.
Is credit history important?
Credit history is developed by how well you manage your finances such as credit card use, mortgage loans, automobile loans, etc. Early in life, I was caught in this trap. I was taught to always pay cash for everything and I did just that. Unfortunately, none of those purchases ever showed up on a credit report and I had zero credit history.
It was no easy task getting my first credit card and I began using it every month for various purchases. I made sure to never max the card out and paid it in full every month and always on time.
When a lender today is considering your request for financing, they look at your credit report to see what type of history you have in paying your bills, etc. They look for proper credit card usage as well as other types of financing that you have. They don’t want to see late payment fees either, so pay on time, and review your credit report annually to be sure it’s correct.
Using a credit card just to improve your credit score and credit history is a smart move. A general rule of thumb is to use about 20% of the approved limit of your credit card. If you have more than one, 20% of the combined approved limits. When your monthly statement (s) arrives, PAY IN FULL. Don’t carry a balance month to month, it will hurt your score.
Use your credit cards wisely and pay in full on time or before, and it won’t be long until you have a strong credit score. Having a strong one will often get you a better deal. When financing a vehicle for instance, be quick to point out that your high credit score qualifies you for a break on the interest rate. You’d be surprised how often the lender agrees with you.
A credit card can be likened to insurance.
Even if you feel that you don’t need to have a credit card (and perhaps you don’t), it’s a good to have one in case some emergency arises. You can consider the card just like insurance, when some catastrophe hits, the card can pay off in a big way. If you do any traveling, you’ll quickly discover that hotels and many airlines look for a credit card to hold.
Credit cards can get you into debt big time.
Having said all of the above, yes, credit cards can get some individuals into trouble. If someone has difficulty controlling their spending, and just has to have everything they lay their eyes on, a credit card can be maxed out very quickly.
Usually, when the monthly statement arrives, they never have the cash to pay it in full and pay the minimum payment called for by the card issuer. This is bad news and the trap begins to close. These types of individuals should not be using credit cards, period.
All they will succeed in doing is to harm or utterly destroy their credit score.
To summarize, credit cards can be a danger to some and a very good thing for others. Those who have difficulty resisting the temptation to buy and simply can’t control spending, need to steer clear of their use. All others can use the credit card to build a strong credit score and credit history. You need to review your personal lifestyle and decide for yourself if a credit card is really necessary for you.