With the rising popularity of financial gurus like Dave Ramsey and Suze Orman, and the downturn in the economy, many people are reevaluating their finances. Before you cut up your credit cards, take a look at these pros and cons of having a credit card.
Having a debit card with a Visa or Mastercard logo means that the card can be run as a credit card, but still pulls money directly out of your checking account. When shopping online, it’s practically a necessity at most websites to at least have a card with a Visa or Mastercard number to purchase anything.
Credit cards are, of course, helpful in establishing and maintaining a credit history. This will help you in the future when securing a car loan or a mortgage.
If you do a lot of traveling, many hotels will not accept debit cards for in-room charges, or will put a hold on a large amount of money as “security” during your stay if you use a debit card. There are some car rental companies that refuse to rent out vehicles without a credit card.
Some credit card companies also offer automatic insurance on rental cars, so that travelers will not have to pay extra for additional insurance. Your credit card may also offer additional insurance perks for travel.
It’s easier to dispute a charge with a credit card. Your entire bank account will not be at risk if you need to dispute a charge. With a credit card, you simply call your credit card company, explain the situation, provide any documentation, and most will not allow that particular charge to gain interest until the dispute is settled.
Many people keep a credit card on hand simply for extreme emergency purposes. If you plan to do this, and don’t have strong willpower, you should keep the credit card in a safe place, such as an in-home safe, or even in your freezer!
If you pay your balance in full every month, a credit card with bonuses such as cash back, frequent flier miles, or points that can be redeemed for gift certificates or merchandise can be a way of getting “free” money for spending money that you were going to spend anyway. A recent study showed that almost half of Americans carry a balance on their credit cards. If you have a 0% finance rate, that isn’t a problem, but most cards only allow a 0% rate as an introductory offer.
Annual fees are also a con to using credit cards. Try to find a card that does not have an annual fee, or try calling your credit card company to waive the annual fee. Many companies will waive the fee if your account is in good standing.
In the end, a credit card is not necessary, but it does make certain things easier.
