Credit Cards – A Necessary Evil

September 13, 2019

It’s rare to hear anyone proclaim their love for credit cards. More often, you’ll hear complaints about interest rates and debt.

Most millennials have heard of the evils of credit cards from parents, friends, or loved ones. Unfortunately, for all the bad they can bring, they’re also a vital tool in specific cases.

When is a credit card a necessary evil – and how can you avoid a bad experience?

Building Credit

Typically, banks and other entities that loan money want assurance that they’ll get their money back eventually.

The more you ask for on a first-time loan, the more risky you are without an established and reputable credit history. Credit cards are, in a roundabout sense, a tool to see how good you are at managing your money. They prove if you’re reliable and consistent in paying back borrowed funds.

As such, investing in a credit card may be necessary to broaden and strengthen your financial future.

The Dangers

Borrowing money without ever handling it directly lends itself to the mental detachment of the transaction. Credit can quickly build up unless you maintain a watchful eye on it and keep track of what you’ve already borrowed.

Try to reserve credit card use to larger, one-time payments, as opposed to smaller purchases you’ll make several times throughout the week or month.

You’re also in danger of overspending, as credit cards won’t tell you that you’ve exceeded the amount you’ve saved in your checking account. This may lead to paying minimal installments. Only paying the minimum on your credit card lowers your credit score and increases the amount of interest you’re paying back.

It’s a good plan to regularly check your bank account – whether online, in an app, or in person – to ensure nothing sneaks up on you.

Working the System

The best way to use a credit card is only as a tool for building credit.

Use it strategically, only buying things you know you can pay back within a single payment. Thankfully, credit scores don’t care too much about what you buy, so long as you pay it back.

As such, you can buy a game system, a new computer, a nice new mattress, or whatever else you’re in need or want of buying. Just remember: only do so after you’ve saved up enough money to pay it back immediately!

Good in Emergencies

Though credit cards are a good tool for building credit, they’re particularly helpful in emergencies. There are times where you simply lack cash when you need it – and a credit card may save you.

While it’s best practice to only use credit cards for things you can pay back right away, that advice only works for expenses that can wait. In these situations, having a credit card on-hand can help you avoid going into serious debt, which can harm you long-term.

Just be sure to pay back that debt as quickly as you can, or else risk having that notorious bad credit card experience.