3 Signs You Aren't Ready for a Credit Card

Don't get a credit card if these things apply to you.

Credit cards can be a great tool. They let you earn rewards for your routine spending. They can also help you to build a positive credit history, provided that you pay your bills on time and don't max out the cards.

But unfortunately, you can get into serious financial trouble if you get a credit card before you're financially ready. And there are three key signs that could suggest you aren't in the right position to use a credit card responsibly. Here's what they are.

1. You don't have a budget

Credit cards can work well for you if you always pay off your bills on time and in full every month. The history of payments you develop can help you raise your credit score. And you can earn credit card rewards without having their value be dwarfed by the expensive interest that's typically charged if you carry a balance.

Unfortunately, if you don't live on a budget, it could be difficult to make sure you aren't spending too much on your cards. It's just too easy to reach for them and charge items without checking if you can afford to first.

Once you have a budget and you know what your spending limits are, though, you can make sure you aren't charging more than you can easily pay back. That way you'll get the benefits of using a card without the downsides that come with paying costly interest charges.

2. You're living above your means

When you spend more than you earn, you may have a serious financial problem. And credit cards can enable you to end up in a bigger hole.

You could quickly find yourself getting in way too deep when you have a credit card that lets you charge purchases you can't afford. And interest charges will only end up making every purchase more expensive.

Getting a credit card without taking control of your spending could also make it much more difficult for you to live within your means later. That's because you're committing your future paychecks to paying credit card debt you incur today.

Unless you have control over your finances and are spending less than what you earn consistently, steer clear of credit cards for now.

3. You aren't keeping track of your spending

Since you want to make sure you can pay off everything you charge when your credit card bill comes due, it's helpful if you're already in the habit of tracking your spending. If you monitor where your money is going and stick to your budget, you won't be surprised by your credit card bill each month. Keeping track can be tough, so check out the best budgeting apps if you need a little help or just want a tech-friendly way to keep an eye on your expenses.

If any of these red flags apply to you, that doesn't mean you have to swear off credit cards forever. It just means that if you want to reap the benefits of credit cards, you may first want to commit to living on a budget, spending within your means, and tracking your purchases before you make them. These are good financial habits to adopt anyway, so use your desire for credit card rewards and perks as an incentive to inspire you.