The idea of credit has been around for quite some time, and so have credit cards. Each day, millions of Americans use credit cards to purchase just about everything. That also means that a good proportion of those people are probably misusing their credit cards too. Managing credit properly is a skill that takes years to perfect. Still, credit cards play an important role for thousands of people. For every positive point about credit cards, there is usually a negative to it too. So what's the deal with that piece of plastic in your wallet?
You get to build your credit.
Obviously, proper use of a credit card results in great things for your credit history and score. Using your credit card and regularly paying off the balance will result in increased credit limits and more. The first credit card you own can lead to a great experience with credit cards and loans if you manage it well enough. Without a doubt, credit building is the best long term result of having a credit card. Poor management of a credit card leads to the exact opposite though.
There's always emergency money.
Smart consumers use credit cards exclusively as a source of emergency money. Having an extra few hundred or even few thousand dollars at your disposal can get you out of any financial trouble you are in – albeit temporarily. Still, you can get that random medical bill paid or that pesky overdue cable bill taken care of. Credit cards are great for the occasional dark financial times that everyone happens into on occasion.
Rewards programs are always fun.
Some credit cards come with rewards programs, which are extremely useful for people who constantly use their cards. Don't expect to get rich by using these rewards programs, but you can get some nice gift cards, statement credits, or merchandise every now and then. However, you shouldn't use your card simply to earn rewards because that will end up as a huge waste and loss of money.
Overusing a credit card can mean some hefty bills.
If you use your credit card too much, then you will really start to see some huge finance charges. Unfortunately, you will notice too late that these finance charges are no joke and can add up quickly. You could end up with tons of huge payments and late fees and more. The end result will be ruined credit and thousands of dollars worth of damage to your wallet. Of course, it could get even worse.
A credit card becomes a crutch for many.
Too many people use their credit cards as a crutch anytime that they need to buy something. Sure, credit might be convenient, but it shouldn't be the only thing you use to pay for something. Credit card limits aren't infinite, so you will run out of money eventually – and feel the effects quickly. Using a credit card on rare occasions is perfectly fine, but treating it like your personal bank account is a huge mistake.
Well, the ugliest consequence of having a credit card involves a snowball effect. You could potentially end up going bankrupt because you can't pay your credit card bills, especially if you have multiple cards with high limits. It might sound improbable, but some people can ruin their lives by overusing credit cards. Of course, you have to be pretty oblivious to how much you spend. Still, the possibility is there, and you shouldn't risk hefty late payments, debt collections calls, and more.
Do you need a credit card?
The simple answer is no, but they do have plenty of benefits. Without hesitation, the credit card can be useful in emergencies or as an occasional treat. It just depends upon how well you can manage your credit and other finances overall. Plenty of people have no problems whatsoever using credit cards regular, but others destroy their lives. Either way, you can't just assume that nothing bad could ever happen when you use a credit card.
Do You Really Need a Credit Card? and Credit Card Basics