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Do I Need a Credit Card?

By Maurie Backman – Dec 1, 2017 at 2:36PM

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The quick answer: Probably.

Though credit cards are unquestionably convenient, they also open the door to overspending, which could explain why the typical American household carries roughly $16,000 in debt. If you're not keen on paying interest, and don't want the stress that comes with making monthly payments on time, you may be wondering whether it's worthwhile to get a credit card in the first place. After all, if you pay all of your bills from your checking or savings account, what's the sense in opening the door to temptation?

But while it's true that many working adults establish good credit and manage their finances just fine without a credit card, there are also different benefits to having at least one, such as cash-back rewards and purchase protection. And in some cases, you actually need a credit card to do things like reserve a car rental or hotel room. That's why it pays to get a credit card, even if you're planning to use it sparingly.

Credit application


Why get a credit card?

When we think of credit cards, we tend to associate them with debt, and understandably so. Consumer debt has reached an all-time high in the country, topping the $1 trillion mark. And countless Americans continue to make the mistake of abusing their cards and racking up hefty interest charges as a result.

On the other hand, there are certain reasons why it pays to get a credit card. For one thing, a credit card can actually help boost your credit score by allowing you to establish a solid payment history. Your payment history speaks to your ability to pay your bills on time, and it's the single most important factor in determining a credit score. If you charge a small amount on a credit card each month, and then pay it off on time and in full, that alone can help you build or improve your credit.

Having a credit card can also help with another aspect of your credit score: your credit utilization ratio. This ratio measures the extent to which you're using your total available line of credit, and the lower that number, the more it'll help your score. If you open a credit card that comes with a $3,000 limit, and you never charge more than $300 in a given month, you'll boost your score by virtue of keeping your credit utilization ratio on the low side.

But credit scores aside, there are other reasons to shop with a credit card. For one thing, you'll typically get cash back for the things you're already buying. Furthermore, when you use a credit card, you'll be protected in the event something you purchase is lost, stolen, or defective. Additionally, many credit cards offer price match or rewind programs where if you buy something and it becomes available shortly thereafter at a lower price, your credit card company will refund you the difference. When you pay with cash, you don't get any of these benefits.

The right way to use a credit card

If you make a point to use your credit card wisely, you won't have to worry about landing in debt. As a general rule, only charge what you can afford to pay off by the end of each month, and mark your payment due date on your calendar so you're sure not to miss it. Better yet, enroll in an automatic payment program so you never have to worry about being late.

On top of this, study your card's rewards program in order to maximize it. If your card gives you double reward points on gasoline, for example, use it to pay every time you fuel up your card, and use cash for purchases that don't come with as generous an incentive.

Though you can technically get through life without a credit card, you're apt to encounter situations where having one will come in handy. It pays to find a card with no annual fee and use it occasionally to build credit and snag rewards. As long as you stay within your spending limits, you'll enjoy the perks of a credit card without the downside.

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