5 Types of People Who Should Never Carry Credit Cards
by Lyle Daly | Nov. 1, 2018
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.
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.
Our credit card expert uses the card we reveal below, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.
But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.
That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.
About the Author
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.