Why Credit Cards Aren’t For Everyone
For at least the last twenty years, credit has become part of the American way of life. Many, many people have credit cards and sadly the average credit card debt is astronomical. It is important to remember that credit isn’t a bad thing, its how you use and make it part of your life that’s important.
THE PROS OF HAVING A CREDIT CARD
Some types of cards can be used just about anywhere.
This is safer than carrying lots of cash and makes a large purchase easier. This is also better if you travel, because credit cards usually give a great exchange rate and the likelihood of being ripped off with money you’re unfamiliar with gets diminished.
No Payoff Deadline–important for emergencies
This is important for very large purchases, you will get to buy the item now and can pay it off in time. This is particularly important for emergencies. I remember when money was tight, the hot water heater broke. The credit card came in handy, because you really can’t go without a hot water heater. It is a necessity. Of course, now I have an emergency fund to take care of these expenses, but credit was vital at the time of the emergency.
You don’t have to carry money–protection
This is overall safer than carrying money. I am always amazed in the retail store that I work at when people hand me 800 dollars in cash verses putting it on a card. I would not be comfortable carrying that much cash.
If you lose it, you can cancel it!–safer than cash
This is important, because there is no where you can call if you lose or having your money stolen. If your wallet or purse gets stolen, you can just call the company and cancel the card. It’s just plastic, its inconvenient but you’re not out anything. However, lose $200 because your wallet is stolen and you are out $200
Keeps a record of your spending
This is great, especially if you own a business. The statement keeps track of where, when and how much you spent. Some cards will go one step further and offer a detailed report at the end of the year.
Reward offers by many credit card companies
The rewards are more than a key chain or a trucker’s hat. In fact, that form of solicitations are illegal. However, many credit cards do offer airline points or other great items just for using the card.
Credit cards allows you to buy and use and expensive item. Some people its the only way you can purchase large items.
Builds Good Credit
Credit cards are a great way to build credit history. It makes it easier to get more credit for things like a house or car later.
THE CONS OF HAVING A CREDIT CARD
Credit Cards are not a good thing if you don’t know how to use them.
It automatically makes anything you purchase more expensive. Miss a payment and legally the credit card company can charge you more than 20% interest. This can really add up. If you don’t pay off the item you bought “on sale,” you can pay more for the item than if you just paid for it with cash.
You can overspend your budget
People often use credit to live beyond their means–buying items they simply can’t afford. This takes a lot of discipline and understanding of how you spend money. If you are quick to use a credit card to buy a pack of gum, then credit cards are probably not for you.
Can become difficult to pay off
Credit cards can feel great when you start, but boy they balances can add up fast. I always tell my students, you just dug a hole with a bulldozer and were given a spoon to fill that hole back in. Not to mention, lenders have legal claims against your future income should you not be able to repay a debt. It can be both stressful and overwhelming and complete side track you financial plans.
$10 bucked to death
This is when you have countless credit cards and each card has a ten dollar monthly bill or a small monthly bill. It adds up and have 8 credit cards with $20 minimum payments is all of a sudden $160 monthly expense.
This is when someone takes your identity and creates large amounts of debt in your name. Anybody that goes through this will tell you it is incredibly painful to get fixed. So, be careful with your credit cards and/or Social Security number.
At the end of the day, it is important to understand that credit cards are neither good or bad. It is people’s spending choices and lack of understanding of credit that makes credit cards good or bad. It is important to know you as a spender and decide if credit cards are right for you.