Published in: Credit Cards | Nov. 1, 2018

5 Types of People Who Should Never Carry Credit Cards

By:  Lyle Daly

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Used incorrectly, a credit card can wreck your finances. Find out if you’re one of the types of people who should stay away from credit cards.Woman Carrying Several Shopping Bags

Image source: Getty Images.

There may not be a financial instrument as divisive as the credit card. Many consumers use their credit cards to their advantage by accumulating travel rewards or cash back, but others only accumulate mountains of debt and bad credit scores.

Although anyone can end up in trouble with credit if they’re careless, there are certain types of people who should never carry credit cards.

1. The shopaholic

Some people shop solely out of necessity. Some have fun shopping but manage their spending properly. And then there are those who love it so much they become addicted to it. They enjoy the rush of buying something new, even if it’s something they don’t really need.

When you’re a shopaholic, controlling your spending is hard enough. The difficulty ratchets up even more if you sign up for a credit card that will allow you to spend thousands of dollars and pay it off later.

Until you’ve gotten a handle on a shopping addiction, a credit card is a terrible idea that will likely lead to overspending. Then you’re left with a big balance accumulating interest until you pay it off.

2. The unorganized

It’s never good to be unorganized, but the consequences get much worse when credit cards are involved.

Miss a payment on a credit card and you’re looking at a late fee. If you don’t make the payment within 30 days of the due date, you’ll also take a serious hit to your credit score.

Fail to keep track of your balance and your credit limit, and you could max out your credit card. After that, you either won’t be able to use the card or you’ll incur over-the-limit fees each time you do. A maxed-out credit card could also mean high credit utilization, another factor that brings down your credit score.

3. The consumer who likes to carry a balance

Credit card companies make a lot of money from those consumers who carry balances month after month. With the average credit card APR being 17%, you end up paying much more than a product’s original purchase price if you let the balance stick around.

Since credit cards are revolving lines of credit, debt can start piling up quickly. You spend a bit more than you should for several months in a row, make minimum payments, and suddenly, you’re dealing with serious credit card debt.

The best strategy with credit cards is undoubtedly to be a transactor, which is a consumer who pays their full statement balance every month. If you can accomplish that, you’ll never pay interest.

4. The financially uneducated

Finances are an area where the American educational system is lacking. Students often complete their schooling without knowing the first thing about how to make a budget, how interest rates work, or how to use credit cards properly.

This isn’t something to be ashamed of, but it is something to correct before you get a credit card. There are all kinds of common credit card mistakes consumers make because they don’t know any better, including:

  • Making minimum payments
  • Maxing out credit cards
  • Using credit cards for cash advances

If you’re not careful, these mistakes can hold you back for years.

5. The person who can’t stick to a budget

If you frequently find yourself spending all the money you make, either because you aren’t following your budget or you don’t have a budget, then a credit card will exacerbate those issues. You can only spend what you have when it’s cash or a debit card. Credit cards make it easy to spend beyond your means without really considering “can I afford this?”

To get a credit card, you should consider it a prerequisite to have a budget that you follow every month. This way, your card won’t cause you to change your spending habits.

Don’t let a credit card sink your finances

Whether you end up loving or hating credit cards depends on how disciplined you are financially. If you fall into any of the groups above, then you should focus on correcting that before you fill out a credit card application.

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