5 Warning Signs You're Not Ready to Have a Credit Card

Credit cards are useful, but they also have their risks. Since they make it easy to borrow money, it's also easy to end up in debt with them. And if you don't manage your credit card well, it could damage your credit score. These kinds of issues can take years to fix and cost you thousands of dollars.

Because of the risks involved, it's not a good idea to open a credit card before you're ready. If any of the following warning signs sound familiar, you're better off waiting.

1. You have trouble paying bills on time

If paying your bills often slips your mind, adding a credit card to the mix is a recipe for disaster. Your card issuer can charge you a late fee each time you miss a credit card payment.

Once your bill is 30 days late, then the card issuer can also report the late payment on your credit file. This will lower your credit score -- some consumers see their scores drop by over 100 points from a single late payment!

Find a system for paying bills on time before you get a credit card. You could set up autopay. Or, add monthly payment reminders to your phone's calendar.

2. You're already struggling with debt

When you're trying to get out of debt, don't put yourself in a situation where you could potentially add more. Now, to be fair, it's possible to use credit cards without going into debt. If you pay in full every month, you'll stay out of debt and avoid interest charges.

But that can be hard to do when money's already tight, so it's not worth the risk. If you have personal loans or other expensive debt to manage, focus on paying that off. Once you're in a better financial position, then start thinking about credit cards.

3. You spend money to make yourself feel better

Have you ever noticed that you feel better after you buy something? It's not just you, and there's a scientific reason behind it. Making purchases triggers the release of dopamine and endorphins in the brain.

If you get into the habit of seeking out that same feeling, it can lead to overspending. Some people even end up with a shopping addiction. They spend more and more on items they don't need, all because of the rush they get from making the purchase.

There's nothing wrong with spending money on yourself from time to time. But if you often find yourself spending money because you like how it feels, getting a credit card will likely only cause you to spend even more. Look for healthier outlets so you don't need to rely on spending money.

4. You don't understand how credit cards work

One of the reasons people get into trouble with credit cards is because they don't entirely understand them. For example, some people only make minimum payments on their credit cards, because they figure that's all they need to pay. While that's technically true, when you only make minimum payments, it can take years or even decades to pay off credit card debt.

It's an understandable mistake. No one instinctively knows that you should pay more than the minimum (and ideally, the full balance) on a credit card. But it's a mistake that can cost you quite a bit of money. If you make minimum payments on a $3,000 balance, and your card has a 20% APR, it will take you nearly 19 years to pay off and cost you $4,390 in interest.

Fortunately, this is one of the easier issues to solve. Spend a little time learning how credit cards work before you apply for one. The Motley Fool Ascent's beginner's guide to credit cards can help you learn everything you need to know.

5. You'd spend more than you earn

Credit cards allow you to borrow money and pay it back later, but that's not the best way to use them. You get more out of credit cards if you pay in full every month. If you do that, your card issuer won't charge you any interest on your purchases.

If you know that a credit card would tempt you to spend more than you earn, you shouldn't get one. This never ends well. You'll be going deeper into debt every month. Your credit card balance will get bigger, which means it will cost you more in interest and be harder to pay down. You should only get a credit card if you're already in the habit of spending less than you make.

It's better to recognize you're not ready for a credit card than to rush in and regret it later. These are all fixable issues, but they're all easier to fix if you do it before adding a credit card to your wallet.