Are credit cards bad?
No! And yes! But really, it’s hard to say. Are cars bad? They’re dangerous and expensive and polluting. But they take you where you need to go, whether it’s your job or the gym or volunteering or a road trip. (Remember going places?)
So which is it?
There are good things and bad things about credit cards. When used responsibly, they can be really helpful. When used poorly, they can make you, well… poor.
👍 What they’re good for: Participating in adult society
Building credit - You might want to buy a car, or a house (someday). Usually that means getting a loan. Whoever is going to let you borrow that much money will want to know that you have a history of paying your debts. If you have used credit cards responsibly in the past, they will trust you more and charge you less in interest.
Saving money on stuff you were going to buy anyway - There are lots of cards that offer cash back or rewards points. Or a solid discount on a large purchase if you open a new card. These things can save you money, as long as you follow up and pay your bill, in full and on time.
Adding security - If your debit card gets stolen, whatever is charged to your account gets subtracted (debited) right away, which means you have to get it back. With credit cards, you’re not out anything. Either way, call the bank or credit card company immediately and report that nonsense.
Going places, doing things - Credit cards are often easier to manage for sellers on the other side of a transaction, which means they’re generally accepted everywhere.
👎 What’s so bad: This is literally how they get you
Encouraging you to spend money you don’t have - Understatement alert: This not a good habit to get into. The best way to manage credit card debt is to not have it in the first place. If you don’t have the money in your checking account, don’t put it on a credit card. Don’t do this.
Costing you money in interest - If you don’t pay your credit card bill in full, you will be charged interest. This ADDS UP. FAST. Don’t be fooled by introductory APR either. What sounds like “0% buy now, pay later” actually means “spend now, pay and pay and pay and pay, how about 30% more, really soon.” Pay your balance in full every month. Don’t get charged interest.
Costing you money in fees - If you pay late or go over your credit limit, expect to be charged hefty fees. Some cards also charge annual fees, just for the privilege of carrying plastic around in your pocket. Are these worth it? No, they are not. Don’t get charged fees.
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I need deadlines, because I’m not very good with them. Sometimes I’m just late. Today this blog post is late. On a few occasions, I’ve missed the due date on my credit card bill. Oops. When this happened, I called the credit card company and asked them if they could remove the late fee. They did, because I’m generally a good customer, and I paid the bill online immediately, for the same reason. Sometimes it pays to ask.