Do You Really Need a Credit Card?

There are so many banks and credit card companies out there telling you that you need a credit card, but before you sign on the dotted line you should really consider your options. It is very possible to get by without a credit card, and although a card may be a useful tool, it can also be a huge liability.

Common Misconceptions

There are many misconceptions related to credit cards. Here are the five most common:

1. Credit Cards are Necessary when Building Credit

– In order to build credit, you need to pay your bills on time. That doesn’t necessarily mean that you need a credit card bill. You can build credit by paying rent, utilities, and other monthly bills on time over a few years. Yes, a credit card bill may help you build your credit history faster, but it is not entirely necessary

2. I Need to Have the Option to Shop Online and Rent a Car

If you have a debit card, you don’t need a credit card to make these purchases. Everything you do with a credit card can now be done with a debit card, including online purchases and car rentals. With this option, you will not be tempted to spend money that you do not have.

3. I Want to Have Credit in Case of an Emergency

If you plan ahead, you can save money in an emergency fund for these situations. If you save enough to cover three to six months of expenses, you should have enough set aside for any emergency, including car trouble, medical expenses, or even the loss of a job.

4. I Want to Save Money on Purchases

Stores that offer discounts for store credit card holders don’t give those offers to help you save money. They offer those rewards because they know that the discounts will bring you back into the store. They also know that many people don’t pay off their credit card bills each month, so they could end up making more on interest than on the actual credit card purchases.

5. I Want to Earn Rewards

If you can be responsible and pay off your credit card bill each month, credit rewards can be wonderful. However, these cards usually come with an annual fee, and if you aren’t able to make payments on time, the rewards are usually revoked. Credit card rewards are definitely not necessary, and they should not be the deciding factor when you are choosing whether or not to get a credit card.

The Good
As you can see, having a credit card is not absolutely necessary, but there are some good reasons to have one. The obvious perks have already been listed. You can use your card in an emergency, for online purchases, or to save money and earn rewards. However, all of these perks will only be in your benefit if you pay off your balance every month. Abusing the card will only cause poor credit and financial turmoil.

One major advantage to credit cards that has not yet been mentioned here is the ability to have secure purchases and purchase insurance. Many credit card companies will offer an extended warranty or purchase insurance if you use your credit card on the purchase. This will allow you to get your money back if the item is stolen, lost, or damaged. If you make online purchases or buy items overseas, you can often take advantage of purchase insurance if the product is not what you expected or if the product is not what was promised.

The Bad
When others discuss the reasons not own a credit card, they usually focus their discussion on interest rates and the high cost that typically goes along with those rates. These are very good points that should go into consideration when choosing whether or not to get a credit card because the rate could rise and cause you to pay much more than you intended. However, a credit card has many other downfalls that should be considered, and these downfalls could cause you to go into debt if you are not careful.

The fees of credit cards alone could be very substantial. These fees could be anywhere from $50 to $400 per year, and that only covers the fee to use the card. You can avoid exception fees if you stay within your credit limit and pay your bills on time, but if you don’t follow the rules of the credit card, these fees could be very large.

Handling a credit card properly takes time and commitment. You should always stay in control of your finances and make sure you are informed of your limits, terms, and conditions with your credit card. When you start to see that your credit card purchases are getting out of control or that you are nearing your credit limit, it may be too late, and you could be at risk for higher fees and interest rates.

Do You Really Need a Credit Card?

Ultimately, you will be the only one who can answer this question. You should seriously consider all of your options, and put yourself into the equation. Will you be responsible enough for a credit card? Could you live without one, at least for now? There are a lot of questions you should ask yourself before you decide. There are other alternatives at your disposal, and you should be completely sure of your decision before filling out an application. It can be easier than you think to be financially responsible, but it can be very difficult to get out of trouble once you are in debt.

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