Are Credit Cards Really Worth It?

Owning a credit card is as much of a milestone as it is a responsibility. Whether you’re an experienced or novice credit card owner, you likely understand the importance of owning a card and have heard of certain pitfalls to avoid.

There are several ways to cover upcoming expenses and deal with unexpected costs, and a credit card is a standard tool that borrowers will use to take care of any urgent purchases.

Understanding the ins and outs of owning a credit card is essential to making healthy spending decisions and building lasting habits. But it can be challenging to know whether or not there is more benefit than a risk to credit cards. In reality, the answer varies by person, but it can help to have a basic understanding of the purpose and risks involved.

So are credit cards really worth it? Let’s find out.

The Purpose of a Credit Card

The purpose of a credit card is to provide you with a way to purchase goods and services under an agreement that you will pay back the credit card provider in a given timeframe. In most cases, there is a set interest rate attached which can accumulate if payments aren’t made in full before the due date.

Credit cards can be used for a variety of reasons, from groceries to entertainment or even unexpected medical expenses or home repairs.

How to Use a Credit Card Wisely

Smart credit card usage can feel easier said than done, but with a commitment to healthier habits and strategic spending, it’s entirely achievable.

Before you sign on the dotted line, consider shopping around and comparing interest rates and perks between credit card companies — this is especially helpful since no two companies are alike. Some offer air miles while others offer cash-back.

When using a credit card, it’s essential to keep track of your spending so you don’t reach your limit or push past your initial budget. When the bill comes, you want to make sure you’re able to pay the balance right away — otherwise, you’ll likely end up paying a high interest rate, which can be challenging to pay off in the long run.

When it comes to your credit limit, a common rule of thumb is to peak at 30 percent. This is known as a credit utilization rate. If your credit limit increases over time, you may have more spending flexibility — however, you also have a more substantial responsibility to spend wisely.

The Risk of Credit Cards

Credit cards offer a range of benefits, but they come with just as many risks if they’re not used responsibly. They offer an enticing temptation to overspend, especially on items that are not considered a necessity within your budget.

Credit card debt is common among borrowers across the country and at various stages of life. The more you spend, the harder it will be to pay off your balance on time, which means you’ll likely continue to procure high-interest rates, leading yourself into debt that will take significant measures to get out of.

Conclusion

Credit cards offer several benefits, from cashback opportunities to air miles and rewards points — not to mention their ability to help build your credit score. However, this is only achievable if they’re used carefully and with purpose. Treat your credit card like the privilege it is, and you’re already in a strong spot.

As you build credit and if you’re able to earn more money, ensure that you put the same intelligent practices into play when you pull your credit card out of your wallet.