Should you get a Credit Card?

 Should You Get a Credit Card?

By: Natalie Picard

You’ve just turned eighteen, graduated high school, and are ready to start the journey to the career you’ve been working towards. Now that you’ve reached this age, you have more control than ever over your money. You’ve had a debit card for a while, but you’ve heard about the concept of “building credit” and getting a credit card. Needless to say, you’re a bit apprehensive to have another card to keep track of. Beforehand, it’s important to consider the positives and negatives of adding a credit card to your personal finances, and to formulate a coordinated plan to build your credit for the future. 

Credit cards and debit cards are similar in the fact that they can be used pretty much anywhere as a form of payment without using cash or checks. Cards are often more convenient and efficient payment methods. Besides this commonality, there are many differences between the two. Debit cards are relatively simplistic: when you buy something, that money comes directly out of your bank account. Credit cards, on the other hand, are far more complex. This type of payment card charges purchases using a line of credit. Essentially, you’re borrowing money and eventually paying it back with added interest to the card company. The current average credit card interest rate is 18.04% for new offers and 15.10% for existing accounts. There has been a general pattern of an increase in credit card interest rates over the past couple of years, which is expected to continue into the future. Despite what you spend in interest rates, there are plenty of benefits for having a credit card. Opening one can be critical in building your credit, meaning that you develop a good credit score in order to apply for major loans, rent an apartment, or buy a house. Plus, having a credit card can also mean sign-on bonuses, discounts, and a percentage of cash-back on purchases. These are incentives that credit card companies offer to individuals in order to intice them into applying for their credit card. 

Building credit is an essential part of creating a life for yourself and personal assets, however, debt is a very real aspect in finances, which can be rooted in your payment methods. Credit card debt is defined as the result when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money they have spent. According to the 2019 Experian Consumer Credit Review, on average, Americans carry $6,194 in credit card debt. Some common causes of debt include lack of an emergency fund, medical expenses, divorce, and most-importantly, overspending. The major downfall to credit cards is that you may end up spending money that you don’t have and can’t afford to pay back, accumulate debt, and then have to face debt collectors, and possibly damaging your credit score. Debt is not uncommon, in fact, it’s quite common amongst those who make large financial decisions and need to take out loans for them. However, your financial success depends on if you have a thought-out plan to pay it back or not.

Of course, deciding to open up a credit card is your choice based on your own finances. However, it is wise to acknowledge if you have a steady income, and to plan out your expenses so that you don’t spend more than you can afford. If you take the time to understand your level of financial responsibility and considering the trade-offs associated, it won’t be difficult to know when, and if you’re ready for a credit card. 

Works Cited

About the authors: Erin is a credit cards expert and studies writer at NerdWallet. Her work has been featured by USA Today. “How to Build Credit.” NerdWallet, www.nerdwallet.com/article/finance/how-to-build-credit.

“Debit or Credit Card – What's the Difference?” Education First Federal Credit Union, www.educationfirstfcu.org/Resources/Learn/Financial-Education/Articles/Credit-Credit-Cards/Debit-or-Credit-Card-What-s-the-Difference.

“What Causes Credit Debt? The 5 Leading Causes of Credit Card Debt...” Americor, 14 Apr. 2020, americor.com/the-5-leading-causes-of-credit-card-debt/.

White, Alexandria. “Alaskans Carry the Highest Credit Card Balance-Here's the Average Credit Card Balance in Every State.” CNBC, CNBC, 8 July 2021, www.cnbc.com/select/average-credit-card-balance-by-state/.