If you don't have a credit card yet, it's normal to ask if you're going to get one. While some people may prefer sticking to a cash-only lifestyle to avoid falling into debt, credit cards offer many advantages if you use them wisely.
Begin with these factors, then weigh the pros and cons of having a credit card to determine if it is right for you.
Confirm that you meet the minimum requirements
You must be at least 21 years of age or at least 18 years of age if you have your verifiable income to apply for a credit card.
You could qualify for a co-signatory account without salary, which just a couple of credit card companies allow — or become an approved consumer on another person's account. But in both situations, the other user's credit may suffer if you make transactions that you can't repay. Before going on, make sure they consider the dangers of co-signing or including you as an approved recipient.
Decide if you can pay a deposit.
If you have little to no credit background, one way to launch your credit journey is by using a secured credit card. You'll make a cash deposit, which would also act as your credit line — a $300 deposit, for example, will grant you a $300 credit cap. It covers the lender of a credit card if you don't pay your bill: the company can use your deposit to offset the cost you can't pay.
Just be sure that you're prepared for accountability
You may apply for a credit card, but that doesn't mean you're ready for one. It is essential to do a sort of soul-searching and think how likely you are to keep your balance down and make payments on time. Your target should be to pay your bill in full per month to avoid running up interest charges.
Ideally, before you get a credit card, you'll pay recurring payments on time and handle your debit card without overdrawing your budget. You're probably expected to have some practice keeping your budget, so you're relaxed living well below your credit cap.
Advantages & Drawbacks Credit Cards
Now you can make a big decision: do you need a credit card? Here are the key advantages and drawbacks of credit cards.
| Advantages | Drawbacks |
| You are going to build a credit history | You can be tempted to pay too much. |
| You are going to be covered from fraud liability | You could feel more stressed by bills. |
| When you are traveling, you do not have to bring cash |
You may not be able to use plastic |
| You could get cash back or travel incentives |
Advantages clarified
There's no doubt that a credit card will brighten up your financial future, save you money, and make your daily life a bit more convenient.
You are going to build a credit history.
You need to build up a good financial track record to obtain other lending options that you will need in the future, such as mortgages or car loans. You'll get better terms if you've got a good credit record, too. One easy way to start creating a credit history is by opening a credit card, using it sparingly — say, paying for a monthly delivery service or gas — and paying the bill in full per month. You will also prove to lenders that you can handle funds safely and make payments on time.
You are going to be protected from fraud responsibility.
With data breaches often in the headlines, it is vital to protect your identity and financial accounts, particularly when shopping online. If your account information is hacked, credit cards are subject to less theft and risk than debit cards. Many credit cards have provisions that say that you're not going to be on the hook for a single dollar if you make unauthorised purchases. By statute, you are responsible for no more than $50 worth of purchases that exist before the theft is reported.
Debit cards are operating differently. Based on the moment you claim the theft, you may be responsible for as much as the whole amount that was taken. Plus, when the investigation is ongoing, the funds for checking your account will not be open to you.
When you are traveling, you don't have to bring cash.
Credit cards are more comfortable and better than keeping a bunch of cash in your pocket while you're driving or making a significant order. Some credit cards do not incur overseas transaction fees, ensuring that you can use the card to make payments while you fly overseas instead of pulling out cash from fee-charged ATMs or swapping cash at unfavorable rates.
You could get cash back or travel incentives.
Perhaps the most significant benefit of having a credit card is the opportunity to make offers for the expenses you pay every day. Savvy users can receive cash back or points that can be used with billing credits to free airline tickets. Only your first credit card could give you a chance to win incentives, but most premium cards often require excellent credit.
The key is also to avoid balance because interest payments won't replace your gains.
Explained Drawbacks
Credit cards can be helpful, but they can also be a cause of financial problems. Not understanding how to handle credit cards will build a repayment loop by paying late, and using a significant portion of your credit balance will harm your credit score.
You may be tempted to pay so much.
Having a credit card isn't meant to allow you to buy things you can't afford. But without healthy spending patterns, you could end up with a balance that goes beyond the budget. A simple rule of thumb is to invest just what you know you're going to be able to pay off in full by the due date.
You could feel more stressed by Bills.
If you barely afford to pay other expenses — including rent, car payments, student loans, and utilities — a credit card may sound like a lifeline. But if you make payments and can just afford to pay the minimum you owe, you can quickly get over your head. Focus on streamlining your spending and building a schedule that you can commit to when you resort to credit cards.
You may not be able to use plastic.
If you don't know much about credit ratings, credit records, how interest works, and other important credit terms, you may want to wait until you're able to use credit cards. Improper use of credit could put your credit score at risk, impacting your ability to get more credit when you need it.
When you determine that the time is right for you to get a credit card, it will act as a critical building block for your credit file — and a handy option to better control and optimize your financial life.