These days, almost every adult with some form of income has a credit card. The younger generation, even those still depending on their parents, see credit cards as an accomplishment. But despite the excitement and credit card bonus offers associated with a credit card account, the card might not be right for you.
Before you apply for a credit card, consider if you can use it for your benefit and not land you in debt. Getting a credit card has long-term consequences, so you should use it wisely to help build your credit score. That can eventually qualify you for better rates on mortgages, car loans, and other financial tools going forward.
Benefits of Getting a Credit Card
A credit card will give you access to a revolving line of credit from your issuing credit provider. Credit card accounts come with a predetermined limit based on the issuing company’s assessment of one’s creditworthiness. If the outstanding balance remains within the predetermined limit, one can continue charging.
Having an additional payment option is an advantage. For starters, you will have a safety net in the event of a short-term cash crunch. For example, if you need to take your car to an auto shop for repairs, you just need to charge the expenses to your card. Even if your savings account has plenty of funds, using a credit card can be an excellent way to earn rewards.
However, getting a credit card may not be the best idea for you if you are facing some challenges. Some of the signs that indicate that credit cards are not for you include:
You Only Make the Minimum Monthly Payments
Is your credit card balance increasing over time? If it is, making only the minimum monthly payments may be to blame. Ideally, you should pay off your balance in full each month. That will help you avoid high-interest payments. Making only minimum monthly payments and carrying a balance means that you will pay interest on your credit card.
You Frequently Miss Payments
When you make late payments or miss some payments for any reason, you will end up paying a penalty. That is a fee charged above the interest payments for holding a balance. The penalty fee can be a stinging slap on your wrist. It may also indicate that credit cards are not for you.
You Have High Debt Levels
Are your debt payments overwhelming you? If so, the last thing you want is to end up in a scenario that increases your financial burden. If your debts continue to increase over time, you need to pause before applying for a credit card. And if you have a history of overspending, credit cards may not be right for you.
Credit cards are some of the most common ways people finance large purchases and build their credit. They come with several perks. But before you apply for a credit card, you need to take a minute to consider whether it is right for you.