Why You Should Have a Credit Card

While it’s fashionable in your wallet, I’m hard-pressed to find a reason to carry a credit card. When I peruse the fine print in credit card applications, the terms of agreement statements go on for multiple pages. The fine print puts me between a rock and a hard place if I’m late with a payment. In addition, a card agreement says the card can raise my interest rate with 45 days’ notice for no reason. I mean, can I sign up for such bizarre terms? So, what’s the value of a credit card?

Why You Should Have a Credit Card

As it turns out, plenty of people sign those onerous agreements, raising the question, “Are there reasons to have a credit card?”

• Online Purchases
• Build Credit History
• Cash Back Awards

Online Purchases

Because of today’s online marketplace, where all the transactions are done with plastic, debit cards have been discredited as buying tools because of the online theft issue. I’ve lost $200 using a debit card in online purchases to online theft, so to use a debit card anywhere other than my ATM makes no sense. Debit card money can be challenging to recover after it is stolen, and it happens, in my experience!

That’s one reason credit cards are good tools to have. The exact losses don’t occur when I purchase with a credit card. Here’s why? First, the card offers 100% refunds on all illegitimate purchases made on my card. Second, the card provides a complete conflict resolution between me and any merchant who claims I owe them money for a purchase I didn’t make. If I want to make a purchase online, I should do it on a credit card if I want protection from thieves.

So, online purchasing power is what I get a card for. It’s still a nasty card with adjustable interest rates and multiple fees, so my only way to avoid punishing debt is to be disciplined to pay credit cards back every month. I can’t carry a balance on it and survive, but if I can pay it back every month, I’ll enjoy secure transactions online.

One caveat: I must monitor my credit cards and report theft immediately.

Build a Credit History

Another reason to have a credit card is to build a credit history. It’s hard to exist these days if you don’t have a credit history. A card can help me score a credit history, and the process can begin almost immediately. 

Just apply for the card, and when I get it, take it to my favorite retailer and make a purchase. Then, I pay the bill when it arrives in the mail, and I have a positive credit history. Keep doing the same thing with my card every month, and I’ll keep growing my credit history. Be mechanical about it. Tip: I don’t carry the credit card or make unplanned or impulse buys with it. Therefore, I should be okay. 

Cash Back Awards

Some cards offer cash back awards, usually about 1% on your purchases when I use the card to make purchases. While this is a positive about credit cards, it looks like a ploy to increase my balance. Using it without the necessary calculations is tempting, and that upsets my balance. I don’t want to feel trapped paying those high-interest rates. 

But setting that aside for a moment, I can earn a little money just by using my card when shopping. If none of the purchases are outside what I would buy anyway, I make the purchase and pay the balance at the end of the month. That way, with cash back, I’ll come out ahead. 

It’s important to understand that not every purchase I make results in a cash-back payment. Many cards won’t give me cash-back opportunities in every situation, but some are flexible. For instance, could I pay my rent and utilities with a cash-back credit card, then lump all those funds together and pay my credit card bill when it’s due? Would I earn a $10, $15, $20, or $25 cash back? Check the details of the plastic card. 

Disadvantages of Having a Credit Card

This brings me to the disadvantages of carrying a credit card. The reasons are obvious: 

• High-Interest Rates
• Fees
• Form of poor credit.

All credit comes with an interest rate, but credit cards have high interest rates in most situations anyway because the credit is unsecured. If I fail to pay my balance or am late with a payment, I could be subject to even higher interest rate payments. A card is not a great source for when I need what amounts to traditional credit, a loan that takes multiple months to pay off.

Credit Cards Can Seem Like the Solution

Unfortunately, for me, credit cards are a highly convenient product that’s easy to abuse, as many consumers can attest to. For example, credit cards serve impulse buyers well. Credit cards will serve me well if I want to buy a new computer or smartphone or take a vacation on the spur of the moment. It’s also available for emergencies, which consumers appreciate, but other forms of credit might serve me better.

Credit cards have fees. There are annual fees, late fees, card replacement fees, balance transfer fees, over-the-limit fees, and more. The yearly fees range from $90 to over $400.

Finally, credit cards are a form of poor credit. Poor forms of credit usually have no collateral backing it, which means the lender can charge high interest when I borrow the money. In combination with fees, such cards can become unmanageable if I miss payments or I’m late.

Should You Ever Use a Credit Card or Hold It?

As you can see, limited use of a card can help raise your credit score and, in some cards, cash-back services. But a real problem that arises for many consumers is the convenience. One of the ways to combat such easy convenience is to “hold it.” By holding the card, you put it in a safe place, somewhere other than your wallet, and you pull it out to use it sparingly, with a planned-out strategy to pay the borrowed funds back the next time the bill comes in the mail.

If by “Hold it,” you mean never use it, it won’t raise your credit score at all, but if you never use it, the bank may close the account, which would be a negative hit on your credit score.

But holding it as a rule, pulling it out as an exception, that’s one way I can make having a card work out.

Do I need A Credit Card When I have a Bank Debit Card?

No, I don’t need a credit card. Like I said, I found it a convenience, but it’s not necessary. While I may be ripped off using a debit card online, I can stop a thief from repeatedly stealing from my account. Thieves made multiple small purchases with my debit card, so monitoring the card is now a necessary daily chore. The sooner I’m ripped off, the quicker I can cancel the card. I daily monitor my cards so a credit card thief can be identified and reported as quickly as possible.

Unfortunately, with a debit card, no amount of oversite will save my funds once the thief has absconded with my money. I don’t link a savings account to my debit card or any credit devices. In addition, I keep only small balances in it.

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