Do You Need a Credit Card?

As a young adult, it’s safe to assume that you’ve been advised to avoid getting a credit card at one time or another. However, is it now time for you to get one? I’ve put together a list of reasons why it might be time to look into getting your first credit card:

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Build Credit

One of the main advantages of using a credit card is that it can improve your credit score when used responsibly. You can build credit without one, but regular use and prompt payment of your credit card balance is one of the better ways to boost your score. And because landlords, prospective employers and even cellphone providers may pull your credit report as part of a background check, you want your score to be as high as possible. However, one missed credit card payment can drop your score. But as long as you’re limiting the amount of credit cards you have, capacity and you’re keeping an eye on your payment history, you’ll be well on your way to a prime credit score.

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Protection

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You get more protection if you pay with a credit card than if you pay with a debit card, cash or check. The Fair Credit Billing Act (FCBA) allows you to dispute both fraudulent charges on your account and merchant errors. You also have more time to dispute a credit card charge than a debit card charge. While you only have two business days to dispute a transaction with a debit card, the FCBA allows you sixty days with a credit card. You also don’t have to worry about having your PIN number stolen. And unlike debit cards, credit cards don’t have an immediate impact on your account balance. This means you have more time to resolve any issues.

Potential Savings

The better your credit history is, the cheaper it is to borrow money. If you’re paying off a mortgage or student loans, those savings really add up. And depending on where you get your credit card, some offer incentives like cashback, loyalty points or air miles. You only get those if you pay your bill in full and on time, of course. If you don’t, the interest you’re charged can add up to more than the value of the rewards. But if you’re responsible with your borrowing and payments, you can actually make money off your credit card.

Emergencies

Although you really should have an emergency fund set aside for unexpected expenses, a credit card can give you peace of mind if anything goes wrong. They can cover you when you’re in a bind without enough money in your account. Some credit cards even offer features like roadside assistance or travel insurance. Credit cards should be your last resort for emergencies, though, as paying off the balance before the deadline isn’t always possible. Rely on your emergency fund first if you can. If you can’t, the credit card might be able to cover you in the interim.

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Do you have a credit card? I’d love to know!

Take care,

Jake