Over 183 million people in America have at least one credit card. That’s more than half the country. Getting a credit card might seem like it’s a big deal but maybe you’re not fully sold on getting one. You might’ve heard horror stories of people in credit card debt. Maybe you’ve been warned by parents or mentors when it comes to credit cards.
Whatever the reason for caution may be, we are here to assure you that opening a credit card is a great financial decision. As long as you can follow our tips when using a credit card, you will be completely fine. You’re missing out on all the action!
Build your credit
This is perhaps the most important reason you should get a credit card. Building up your credit is extremely important for your financial life. It can be the difference between being approved for the mortgage on your dream home or being able to borrow money to start your own business.
Having respectable credit is the only way banks and other lenders are going to trust you with their money. When it comes to building up your credit, credit history length and on-time payments are two of the biggest factors. But these two factors don’t require you to make huge financial decisions in your life. You can start improving on these anytime, boosting your credit score early and often.
The earlier in your life you open an account, the longer your credit history will be. Lenders like to see this because it gives them a larger sample size for your financial habits. This is the same for on-time payment history, which typically has the most weight when it comes to your credit score. Both can be worked on by just getting a credit card and making on-time payments.
Free money!
That isn’t a typo. They actually give out free money for signing up and using a credit card. This comes in the form of sign-up bonuses and cash back from spending with the card.
As long as you are responsible and pay off your balance at the end of each month and don’t spend what you can’t afford, you will be making money from getting a credit card. Banks only make money from credit cards when customers do not pay off their debt and have to start forking over interest payments.
When you initially sign up for a credit card, there will usually be a signup bonus. This consists of a lump sum of cash or point (which can turn into cash) that you receive after spending a certain amount of money over the first few months of your account being open. If you’re normal spending habits align with the spending requirements, then it’s a no brainer.
You spend the way you normally do using the credit card and receive additional money. Sounds like a pretty good deal.
Cash back from credit cards
The other way to get money from having a credit card is through cash back perks. Depending on the card you get, you will get a certain percentage of money back from spending. For example, most cards offer at least 1% back on all purchases, which means every $100 you spend you’ll get $1 back.
That might not seem like a lot but again, it’s free money for spending like you normally would. Most cards even have additional perks that might pertain to specific spending categories. Maybe you find a card that offers 3% back on restaurants or 5% back on gas. Make sure to do some research to determine which card gives you the best opportunity to get cash back based on your spending habits.
Other reasons you should get a credit card
Opening a credit card account also has other benefits. Not having to carry cash around or use your debit card for purchases is a huge plus. Having a piece of plastic for spending is much easier than worrying about taking out and having enough cash. It is 2023.
As for using a debit card instead of a credit card, there are couple reasons that might no be best. For starters, your debit card is directly linked to your bank account. Unless you are monitoring your balance at all times, you risk over drafting from your account which comes with fees. A credit card corresponds to a line of credit you have open with the bank and won’t charge your actual bank account until you pay your bill.
Lastly, credit cards offer superior fraud protection. Although some debit cards have improved over the years, credit cards can give you a better peace of mind if someone gets a hold of your information. As long as you report the theft, credit card companies can ensure you won’t have to pay for something you didn’t purchase.
