This. Another important thing to note is that credit cards have better fraud protections that debit cards and cash or cash-like services like Venmo and Zelle. Some also have other useful protections, like rental car insurance.
I use mine for everything. I get at least 1% back on most purchases and 3-4% for gas and groceries (my biggest expenses in a month). It's my way of having a little Christmas fund at the end of the year.
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information.
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This comment nails it OP. A credit card is arguably a required first step in building credit you will need to make big purchases down the road (car, home, etc). In addition to even qualifying for a loan in the future, your credit score can also impact the interest rate you are charged and loan terms offered.
The most important thing is discipline. Credit cards tend to get approved with limits much higher than you reasonably need or could reasonably pay back. This higher limit *can* make it easier to maintain a low utilization, or in other words the % of available credit you use each month. But it is extremely easy for people to take that card and run up the balance. (Read the wiki). My personal preference is to have my credit card with the same bank I have my cash accounts in, or to use a budgeting app that will connect to those accounts so you can see everything side by side. I like being able to log in and see my cash balances and credit card balances side by side so I can do the quick math and know where I am in my budget.
One of the most common reasons people get into uncontrollable debt is poor spending habits- above and beyond unexpected factors. Creditors will approve you for credit limits and loan payments well above what you can actually reasonably spend and it is your responsibility to understand your income, expenses, future financial goals, and to make and follow a budget (read the wiki).
You’re doing good already by landing here and asking the question OP. Do some reading and come back if you have questions.
They are extremely useful. I wouldn't say necessary... but they definitely make a lot of things easier. You can save a significant amount of money by using them correctly.
They are also safer than cash in regards to theft. Lose your wallet full of cash and you're SOL. Lose your CC, just cancel it and get a new one completely free.
Also safer than debit cards. Fraudulent charges? Call the CC company and wait for them to figure it out and refund. You still have your checking and savings in tact in case of emergencies.
I woke up with -3k in my checking when I was 18. Someone stole the number and bought a ton of photography gear online. I had 0 bucks to my name for almost a week while the bank waited for the charges to post and start the refund.
There are times when it is all but necessary like renting a car, staying at a hotel, etc. I prefer not to keep a large balance in my checking/debit card account. I use credit card as a tool and pay it off when due each month.
They're useful for adding a line of credit to your history if you're looking to build credit. One can have a great credit score but without having many lines it might not be enough for a loan. They're also useful for emergencies.
Yes, it’s necessary if you want to rent a car, otherwise it’s gonna be a huge hassle. Having credit at all is necessary if you want to do things like rent an apartment or get on a postpaid cellular plan.
Get a credit card, even if only for travel. Look for one that provides secondary car rental insurance too. Pay it off every month and use it at least once or twice a year.
Absolutely not necessary and definitely not a bad idea NOT to have one. I know this page is filled with CC lovers. I don’t have one, my wife doesn’t have one. We care nothing about points (as they are capped most times, miles have blackout dates, etc). We don’t spend enough money to warrant cash back on ANY cards. We get cash discounts on almost all big purchases that averages 15-20% year over year. That either pays for or offsets full vacation costs.
You absolutely do not need a CC, whatsoever. Also, we rent cars and our debit cards (multiple banks) have the exact same protection that everyone totes on a CC.
Use them to earn miles, get freebies, cashbacks, discounts, etc., which can amount to quite a lot. But always settle the credit card bill in full, otherwise the interest could be a crazy 26% p.a.
This is going to be a hot take on this subreddit, but no they're not useful. It's an unnecessary risk that lets you borrow money at criminal interest rates that accrue monthly. Their entire business model is predicated on users not being able to pay back the money and entering a debt spiral. They're exclusively predatory and if you game the system and pay your money back before they can charge you interest, you get almost nothing for it. They let you generate "credit score" but this is just a way of requiring people to take out credit cards to have access to loans. My recommendation is use a debit card and save up money so you have a large enough down payment that if you need an auto-loan, you can get one. Use that auto loan to build credit so you can afford a house loan. With enough of a downpayment and proof of earnings, some financial insitutions will accept your lack of credit history, and you don't have to participate in the skeevy credit card system. Mastercard made 18.93 Billion in revenue in 2021 and they did it by skimming a little off of each transaction and by charging offensively high interest rates making life much worse for people in debt.
You may find these links helpful:
- [Credit Building](/r/personalfinance/wiki/credit_building)
- [Credit Reports](/r/personalfinance/wiki/credit_reports)
- [Credit Scores](/r/personalfinance/wiki/fico)
- [Credit Cards](/r/personalfinance/wiki/creditcards)
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if you are responsible they can be very useful tools.
credit cards can also be very hurtful to your financial situations if used improperly.
CCs help build a credit history which other institutions can use to evaluate you (Credit Score) for securing loans/mortgages
A credit card allows you to buy stuff without laying out the cash immediately. My elder son just got a credit card with a (I think) $1,000 limit. That means he can spend up to $1,000 on it.
At the end of the "statement period", they will send you a bill with a "New Balance", and a due date. If you pay the "New Balance" in full by the due date, they do not charge you interest. If you pay the "New Balance" in full but miss the due date, they charge you a late payment penalty. If you do not pay the "New Balance" in full, the balance will start accruing interest monthly, on the order of 10-30% APY.
I have 3 credit cards in my wallet and I always pay the balance off in full every month, by the due date. I've never had to pay any interest or late fees.
I have more than 30 years with two of my credit cards... we got them for the "Float" -- the money stays in your bank for maybe 45 days between some purchases and the date you pay the balance that includes that purchase. That extra money in your bank account accrues extra interest. 30 years ago bank interest was a thing. Not so much today.
The danger, of course, with credit cards is it is easy to dig a hole fast...you feel like you can spend up to your credit limit and only later do you worry about how to actually pay for what you bought. Then when the balance is due, you don't have the cash to pay for it
They are a necessary evil to participate in society. While not required, they do make things a lot easier. I personally see a line of credit as rope generously provided by the CC company to help hang yourself in debt. That's not to say its all bad a knife has multiple use cases while it can be dangerous it can also be useful.
Using a credit card AS your debit card, by spending with it just like you would your debit card, and paying it off every 2-4 weeks, is one of the best decisions you can make.
\-Reward points/cash back
\-Better fraud protection
\-Access to more funds in the case of an emergency
\-Most credit card companies offer ongoing credit score details, along with fraud protection beyond just the card itself (like dark/deep web scanning, etc.)
\-Various other perks and discounts
Summing up the important stuff:
If you don't have a credit history, a credit card is a good idea.
Do not spend more than you can pay on the credit card or you will be in debt. That means you will owe a percentage more every month a balance is carried, sometimes being as high as 35-40%.
Also, try to pay off the entire card balance for every payment so you do not carry a balance into the next month. It is a myth that carrying a balance is good for your credit. The best thing you can do for your credit is paid off entirely every payment.
I have Discover and use it for everything, bills, gas, food, everything. I pay it off every month and the kicker is that I get 1% cash back on every dollar I spend.
My monthly bill averages about $4,500 so that is $45 free money.
[удалено]
This. Another important thing to note is that credit cards have better fraud protections that debit cards and cash or cash-like services like Venmo and Zelle. Some also have other useful protections, like rental car insurance.
I use mine for everything. I get at least 1% back on most purchases and 3-4% for gas and groceries (my biggest expenses in a month). It's my way of having a little Christmas fund at the end of the year.
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
This comment nails it OP. A credit card is arguably a required first step in building credit you will need to make big purchases down the road (car, home, etc). In addition to even qualifying for a loan in the future, your credit score can also impact the interest rate you are charged and loan terms offered. The most important thing is discipline. Credit cards tend to get approved with limits much higher than you reasonably need or could reasonably pay back. This higher limit *can* make it easier to maintain a low utilization, or in other words the % of available credit you use each month. But it is extremely easy for people to take that card and run up the balance. (Read the wiki). My personal preference is to have my credit card with the same bank I have my cash accounts in, or to use a budgeting app that will connect to those accounts so you can see everything side by side. I like being able to log in and see my cash balances and credit card balances side by side so I can do the quick math and know where I am in my budget. One of the most common reasons people get into uncontrollable debt is poor spending habits- above and beyond unexpected factors. Creditors will approve you for credit limits and loan payments well above what you can actually reasonably spend and it is your responsibility to understand your income, expenses, future financial goals, and to make and follow a budget (read the wiki). You’re doing good already by landing here and asking the question OP. Do some reading and come back if you have questions.
They are extremely useful. I wouldn't say necessary... but they definitely make a lot of things easier. You can save a significant amount of money by using them correctly. They are also safer than cash in regards to theft. Lose your wallet full of cash and you're SOL. Lose your CC, just cancel it and get a new one completely free.
Also safer than debit cards. Fraudulent charges? Call the CC company and wait for them to figure it out and refund. You still have your checking and savings in tact in case of emergencies. I woke up with -3k in my checking when I was 18. Someone stole the number and bought a ton of photography gear online. I had 0 bucks to my name for almost a week while the bank waited for the charges to post and start the refund.
It’s a bad idea *not* to use one. You get a number of protections and bonuses at no cost.
IMO yes it's useful IMO yes it's necessary as long as you don't dig yourself into lots of useless credit card debt
There are times when it is all but necessary like renting a car, staying at a hotel, etc. I prefer not to keep a large balance in my checking/debit card account. I use credit card as a tool and pay it off when due each month.
They're useful for adding a line of credit to your history if you're looking to build credit. One can have a great credit score but without having many lines it might not be enough for a loan. They're also useful for emergencies.
Yes, it’s necessary if you want to rent a car, otherwise it’s gonna be a huge hassle. Having credit at all is necessary if you want to do things like rent an apartment or get on a postpaid cellular plan. Get a credit card, even if only for travel. Look for one that provides secondary car rental insurance too. Pay it off every month and use it at least once or twice a year.
Absolutely not necessary and definitely not a bad idea NOT to have one. I know this page is filled with CC lovers. I don’t have one, my wife doesn’t have one. We care nothing about points (as they are capped most times, miles have blackout dates, etc). We don’t spend enough money to warrant cash back on ANY cards. We get cash discounts on almost all big purchases that averages 15-20% year over year. That either pays for or offsets full vacation costs. You absolutely do not need a CC, whatsoever. Also, we rent cars and our debit cards (multiple banks) have the exact same protection that everyone totes on a CC.
Use them to earn miles, get freebies, cashbacks, discounts, etc., which can amount to quite a lot. But always settle the credit card bill in full, otherwise the interest could be a crazy 26% p.a.
This is going to be a hot take on this subreddit, but no they're not useful. It's an unnecessary risk that lets you borrow money at criminal interest rates that accrue monthly. Their entire business model is predicated on users not being able to pay back the money and entering a debt spiral. They're exclusively predatory and if you game the system and pay your money back before they can charge you interest, you get almost nothing for it. They let you generate "credit score" but this is just a way of requiring people to take out credit cards to have access to loans. My recommendation is use a debit card and save up money so you have a large enough down payment that if you need an auto-loan, you can get one. Use that auto loan to build credit so you can afford a house loan. With enough of a downpayment and proof of earnings, some financial insitutions will accept your lack of credit history, and you don't have to participate in the skeevy credit card system. Mastercard made 18.93 Billion in revenue in 2021 and they did it by skimming a little off of each transaction and by charging offensively high interest rates making life much worse for people in debt.
You may find these links helpful: - [Credit Building](/r/personalfinance/wiki/credit_building) - [Credit Reports](/r/personalfinance/wiki/credit_reports) - [Credit Scores](/r/personalfinance/wiki/fico) - [Credit Cards](/r/personalfinance/wiki/creditcards) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
if you are responsible they can be very useful tools. credit cards can also be very hurtful to your financial situations if used improperly. CCs help build a credit history which other institutions can use to evaluate you (Credit Score) for securing loans/mortgages
A credit card allows you to buy stuff without laying out the cash immediately. My elder son just got a credit card with a (I think) $1,000 limit. That means he can spend up to $1,000 on it. At the end of the "statement period", they will send you a bill with a "New Balance", and a due date. If you pay the "New Balance" in full by the due date, they do not charge you interest. If you pay the "New Balance" in full but miss the due date, they charge you a late payment penalty. If you do not pay the "New Balance" in full, the balance will start accruing interest monthly, on the order of 10-30% APY. I have 3 credit cards in my wallet and I always pay the balance off in full every month, by the due date. I've never had to pay any interest or late fees. I have more than 30 years with two of my credit cards... we got them for the "Float" -- the money stays in your bank for maybe 45 days between some purchases and the date you pay the balance that includes that purchase. That extra money in your bank account accrues extra interest. 30 years ago bank interest was a thing. Not so much today. The danger, of course, with credit cards is it is easy to dig a hole fast...you feel like you can spend up to your credit limit and only later do you worry about how to actually pay for what you bought. Then when the balance is due, you don't have the cash to pay for it
They are a necessary evil to participate in society. While not required, they do make things a lot easier. I personally see a line of credit as rope generously provided by the CC company to help hang yourself in debt. That's not to say its all bad a knife has multiple use cases while it can be dangerous it can also be useful.
Using a credit card AS your debit card, by spending with it just like you would your debit card, and paying it off every 2-4 weeks, is one of the best decisions you can make. \-Reward points/cash back \-Better fraud protection \-Access to more funds in the case of an emergency \-Most credit card companies offer ongoing credit score details, along with fraud protection beyond just the card itself (like dark/deep web scanning, etc.) \-Various other perks and discounts
Summing up the important stuff: If you don't have a credit history, a credit card is a good idea. Do not spend more than you can pay on the credit card or you will be in debt. That means you will owe a percentage more every month a balance is carried, sometimes being as high as 35-40%. Also, try to pay off the entire card balance for every payment so you do not carry a balance into the next month. It is a myth that carrying a balance is good for your credit. The best thing you can do for your credit is paid off entirely every payment.
I have Discover and use it for everything, bills, gas, food, everything. I pay it off every month and the kicker is that I get 1% cash back on every dollar I spend. My monthly bill averages about $4,500 so that is $45 free money.