Are Credit Cards a Good Idea?
April 5, 2019 | By Louis Tully
Are credit cards actually a good idea? Well, that all depends on who you ask. The responsible few may tell you all about the reward benefits, cash back perks, and the airmiles they’ve racked up from years of watchful charging. They may as well tell you stories of how the credit card companies are basically funding their trips to Hawaii and the Bahamas.
As for the consumer majority, they may have different stories to tell. Ones of insurmountable debt, interest charges, and the debt management plans. Their only wish to one day be freed from the bondage brought on by their own superfluous spending. Some have even gone so far as to file for bankruptcy.
The Ups and Downs of Credit Cards
So, are credit cards good or bad? Well, that all really depends on you, the cardholder. If handled correctly, a credit card can offer huge benefits, giving you an upper hand in your financial game. If used incorrectly though, well, you get the idea. Let’s take closer look at credit cards, what they can offer us, what they cost us, and if they’re even necessary to have in the first place.
Credit Card Options
Not all credit cards are created equal. To start, you have several different companies to choose from:
- American Express
Each card also generally offers an introductory promotion of 0% interest for 6, 12, or even 18 months. Not only that, but you’ll sometimes even receive a cash back bonus when you spend up to a certain amount in your first few months of having the card. The creditor will disclose the details, but it’s offers like these that generally get people hooked in in the first place.
Credit cards also have several other varying factors including:
- Approved credit line
- Cash back options
- Discounts on qualifying purchases
- Friend referral rewards
Why Are Credit Cards So Hard to Avoid?
Avoiding a credit card sign-up is hard – very hard. That’s because credit card offers will follow you everywhere; even at home! Pre-approved offers come through the mail on an almost weekly basis.
Plus, every department store has a card, too. If a Best Buy employee catches you drooling over that 70-inch QLED TV display. It’s practically routine for them to offer their exclusive store card so you can take it home that day with no money down!
Even airlines won’t let you off the plane until they’ve had a chance to offer special deals on flights and airline services when you sign up for their credit card. So, yeah, credit cards are everywhere and some of the promotions that are used to bait consumers are almost too tempting to pass up.
Why Are Credit Cards Bad?
Credit cards themselves aren’t ‘bad’ per se, but there are a few things you should know about them:
- The APR: APR or annual percentage rates are the interest banks charge for the money they’re lending you. Every time you charge your card, you’re expected to pay that charged amount back, plus a little extra. That little bit extra is where the banks make their money. Of course, it’s not a big deal if you’re able to keep your balance down. But when you’ve racked up nearly $10,000 in credit card debt, that little bit extra turns into a real big problem!
- The annual fees: Yes, as if paying interest weren’t bad enough, some credit cards actually charge you an annual fee just to use their card.
- The debt trap: Being able to charge something to your credit card gives instant gratification which is highly addictive. This makes it easier than ever to put yourself in a debt trap without even realizing it.
- The over limit fees: Ever take it too far? Banks and creditors will not hesitate to penalize you with a fee for going over your credit limit.
- Late payment fees: Always pay your bills on time. Failure to pay your credit card bill by the due date can have serious consequences on your wallet and your credit.
Why Are Credit Cards Good?
But are credit cards really that bad? Many financial experts would certainly say so, but how could a credit card be such a risky commodity when almost nobody leaves home without it? Here are a few reasons why so many people choose to hold their cards close:
- The 0% interest promos: Credit cards often come with an introductory promo that allows you to charge without paying interest for a period of 6, 12, or even 18 months. Plus, some even come with an additional cash back bonus for spending up to a certain amount within the first few months. As long as you’re careful to pay back your balance within the promotional period, it’s a great deal!
- The rewards: Who doesn’t want to be rewarded? Rewards are awesome! Credit cards typically offer cash back rewards for all your purchases. Even 1% cash back adds up to a hefty payday eventually.
- The spending power: Credit cards give you the ability to keep spending when your paycheck runs out. It’s not a bad thing if you’re in a financial crunch.
- The freedom: Credit cards can make certain things possible that just wouldn’t be otherwise. Want to take a family vacation? Having a credit card makes it possible. Suddenly, you have a whole new world of options you didn’t have before with just your paycheck.
Are Credit Cards for Me?
The bottom line? There are plenty of pros and cons when it comes to credit cards. Whether or not they’re right for you really depends on you. If used the right way, a credit card can easily be the best thing you’ve ever put into your wallet. But that’s if you can handle it responsibly; if you don’t, it could just as easily become your worst nightmare. So, if you’re seriously thinking about getting a credit card, take a moment to examine your decision by asking yourself a few questions:
- Why am I getting a credit card?
- Do I really need a credit card?
- Which credit card is going to benefit me most?
Another Way to Borrow
If you’re in a financial bind, a credit card isn’t the only thing that could bail you out. Payday loans are also a way to get last-minute financial relief when it doesn’t seem possible. These short-term loans could put just the right amount of cash in your hands regardless of your credit history. For more information, contact your local lender today.