Credit cards are pretty much a way of life in the United States. Many people not only use them for most daily purchases, they carry balances from month to month on them It’s hard for most to picture life without them.
But do you really need them?
Well, no, not really need as such. But most people love having them and the advantages they get from having one or more credit cards.
The Advantages of Credit Cards
Convenience is a big factor for many people. Carrying cash and/or writing checks for purchases just isn’t as easy as swiping your credit card. And if you lose your card, you’re generally not held responsible for the purchases made by someone else. You hardly ever get lost cash returned to you.
They’re also a great way to track your monthly spending. Your credit card statement shows each and every purchase you make with it. That can be pretty handy when you’re wondering where your money is going.
Depending on the card you have, you may get other benefits as well, such as cash back or rewards points. If you’re doing this right these can be a very nice benefit for spending the money you’d be spending anyhow.
If you shop online, a credit card is almost a must. Online shopping without one is considerably less convenient. Many online stores have prices you would have a great deal of trouble beating locally, and often you can only find certain things online to begin with.
A credit card is also one of the simplest ways to maintain an active credit history. If you want to make a major purchase someday, such as a house or a car, having a solid credit history makes a big difference in what loans will cost you.
The Disadvantages of Credit Cards
That’s not to say credit cards are all good. Perhaps the biggest disadvantage is how easy it is to fall into the debt traps. Many people end up paying quite a bit in interest because the money they spend on their credit card just isn’t quite real to them. Overspending quickly becomes debts you will need to pay, and money spent on interest payments.
The interest rate can be quite the disadvantage, especially if you slip up and make a late payment. Not just on your credit card in many cases. If the card issuer finds out you messed up elsewhere you may also be subject to significantly higher interest rates. And of course paying interest means your purchases are costing you more than they appeared to at first.
Even a rewards card can have disadvantages if you aren’t using it right. Many carry higher interest rates, so that those who carry balances really are not getting more for their money. It’s an important factor to consider.
Those who are good with their money in all forms can avoid all these traps, however. If you can keep it paid off and don’t select a card with an annual fee, they’re wonderful tools. But if you tend to have money troubles, carrying a credit card can be little more than a trap.
