Are Credit Cards Worth It?
Credit cards are one of the most common payment methods people use to shop online or in person because of their convenience, security, and ability to rack up rewards and points that can be used towards specific purchases, gift cards, or cover travel expenses. While many individuals are choosing to use digital wallets, most people still prefer credit cards to make purchases, as they don’t rely on their phone’s battery or internet connection to work as digital wallets do. If you’re having trouble budgeting, a credit card can help you maintain a stable system by tracking your expenses through monthly credit card statements. However, you may wonder, “Are credit cards worth it?”
It’s understandable to ask that question as an inexperienced cardholder if you’re worried about falling into debt through this popular payment option. You may also want to avoid any potential damage a credit card can cause to your credit history if you make a late payment or make any incorrect decisions with your card, which can affect your overall rating. Although these apprehensions are valid, you can benefit from having a credit card if you’re responsible with your payments and repay your entire balance each billing period to avoid interest fees. The decision to get a credit card will ultimately depend on your personal preferences and financial situation, but you may reap various perks through this revolving line of credit if you manage your card effectively and pay off your balance on your scheduled due date.
Consider the pros and cons of a credit card to determine whether it is a valuable form of payment to have in your wallet. If you decide that a credit card is a good resource to help you buy items, you can expect to find excellent credit card options from Max CashⓇ partners!² Continue reading for more information about credit cards and what you should contemplate as a potential cardholder to access all the details you need to make an informed decision.
How Does a Credit Card Work?
Getting a credit card can be intimidating if you’ve never used this payment option to pay for your groceries, appliances, and other expenses. However, you can get a better sense of whether this card is the right option for you by learning how it works and what you can expect as a potential cardholder. To put it in simple terms, a credit card works by giving you a revolving line of credit to borrow money for purchases, up to a set credit limit. Once you use your card to make purchases, you must repay the balance you owe to your credit card issuer and can continue borrowing funds with that same card without resorting to a new credit card application.
Typically, when you receive a credit card bill, you can pay down your balance each month by making the required minimum payment or the full amount of your balance on your scheduled due date. Your credit card issuer won’t penalize you for not paying your full balance on your billing period, and your statement is usually available to you weeks before your payment is due, giving you enough time to review your charges and pay your debt. However, it’s worth noting that the flexibility of paying back your entire credit card balance at your own pace comes at the cost of covering interest fees on purchases. While making minimum payments on your credit card can keep your account in good standing, those installment payments can negatively affect your credit score over time because you’d increase your credit utilization ratio due to the high balance on your account.
If you pay your full credit card balance on your scheduled due date, you won’t have to deal with any interest fees or charges on your purchases. In the event that you miss a payment, you may have to cover a late fee for that overdue charge, which can also result in higher interest rates that can complicate the repayment process of your purchases.⁴ If you decide to move your credit card balance from one card to another card from a different provider, you may also need to cover a charge to complete that transfer. Depending on your chosen credit card, you may have to pay annual fees for opening and maintaining your account, but you may access various benefits in return, including cash back, points, miles, and other rewards.
Keep in mind that you can avoid some of the risks associated with credit cards if you’re on time with your monthly payments. If you make the minimum required payment or pay off your entire credit card balance on your due date, you can positively impact your credit score and increase your chances of securing loans and other types of credit in the future.⁵ Your credit history can affect your approval for certain credit card offers, so it’s important that you check your credit score prior to an application. The amount of time it takes to get approved for a credit card will vary with each provider, although it can be a relatively quick process if you fill out an application online and provide the correct information.⁵
Don’t hesitate to review the different credit card options you can access with the help of Max CashⓇ and our partners!² You can compare the various offers available and pick the card that best suits your financial goals and meets your personal preferences.² ⁵
When are the Best and Worst Times to Get a Credit Card?
Although credit cards can provide several advantages, there are certain scenarios where this payment method may not be a viable option. If you’re considering getting a credit card to make purchases, you must first analyze your financial situation and determine whether this card will improve it or put you in a tough position from which it’s difficult to escape.
Take a look at examples of the best and worst times to get a credit card and consider these before you decide to submit an application with your designated issuer:
Best Time to Get a Credit Card if:
- You Plan to Build or Rebuild Your Credit History
- You Want to Cover a Major Purchase You Can’t Handle on Your Own
- The Credit Card Issuer Offers Great Rewards and a Welcome Bonus
- You’re Prequalified for a Credit Card After Filling Out a Prequalification Form⁵
- You Can Transfer Your Existing Credit Card Debt with Another Card That Has Lower Interest Rates⁴
While there are great times to get on board with a credit card, there are times you may want to avoid submitting an application.
Worst Time to Get a Credit Card if:
- A Credit Card Issuer Charges Fees That Other Providers Typically Don’t
- The Hard Inquiry on Your Credit Card Application Reduced Your Score, and You Plan to Get an Unsecured Loan Afterwards
- You Have Problems Controlling Your Spending and Rack Up a High Balance
- You Don’t Have a Strong Credit Score to Qualify for Some Cards
- There are Many Charges That Make it Difficult to Repay Your Balance
- You Don’t Meet the Necessary Age and Income Criteria
As mentioned previously, the decision to get a credit card will depend on your financial circumstances and what you think is best for your situation. However, it’s suggested that you don’t apply for a credit card that offers rewards, for example, if you don’t have enough money to repay it. In addition to that fact, you must also determine if the issuer will be favorable to you and if a credit card will boost or hurt your credit score. Once you review your economic standing and establish if it’s the right moment to get a credit card, you can decide if you can apply for a card now or hold off on an application until a later date.
What are the Benefits of Having a Credit Card?
If you think that a credit card is a fruitful resource to buy items, pay for high costs, or cover unexpected expenses, you may wonder if it can offer various perks that may make it worthwhile for you as a cardholder. Thankfully, a credit card can offer significant benefits besides building credit history and the potential to earn rewards that may be essential for you to consider, including the following examples:
- Protection Against Fraud: Anyone can fall victim to a credit card scam, even if they’re careful about where they use their cards when shopping. For example, you may have lost your card by accident when it fell out of your wallet, or a hacker may have accessed your card information online through large-scale data breaches of retailers’ databases. If your credit card details are compromised, you are protected against that fraud under the Fair Credit Billing Act (FCBA). You won’t be held liable for the full amount of fraudulent purchases, unlike debit card thefts, which hold you accountable for the entire cost.
- Increased Purchasing Power: A major benefit of a higher credit limit is the ability to spend more on a single credit card on large purchases or unforeseen expenses when you don’t have the funds readily available in your checking account. If you start off with a low amount, you can potentially boost that total if you demonstrate good credit card habits when you request an increase with your issuer. In the event that you’re faced with an emergency, you can consider using your credit card for financial stability if you can’t wait to get approved for a loan. Just make sure you’re aware of the interest you’ll have to cover if you decide to make installment payments when it’s time to repay the balance you owe.⁴
- Purchase Protection: In addition to having limits on your maximum liability on credit card fraud, you can have purchase protection on eligible items you bought with your card that can be replaced, repaired, or compensated if someone stole or damaged them. Instead of having to spend the same amount of money to get another product, you can simply get insured for that stolen or damaged item if your credit card issuer offers that benefit. It’s worth mentioning that the coverage amounts for this perk vary by provider, so you must compare all your available options to find the most favorable card. Additionally, you must review your credit card issuer’s agreement with this protection, as it may not apply to certain items, such as used products, antiques, or motorized vehicles.
What Happens if I Use 90% of My Card’s Available Credit?
Many experts recommend using a low percentage of your credit card’s available credit limit instead of reaching high amounts, like 90%. Using a large percentage of your available credit limit, otherwise known as your overall credit utilization, is generally a bad idea. It can significantly lower your credit score and signal to lenders that you are drowning in debt and are a high-risk borrower. If you want to increase your approval odds for loans, rental apartments, and even some job opportunities, you will benefit from having a good credit score that shows you’re a more responsible individual.⁵ You can typically make a positive impact on your credit score if you keep your credit utilization rate low, which you should aim to maintain below 30%, or under 10% if you want to make a better impression.
If you want to reap the benefits of a healthier financial position, ensure you avoid the aforementioned mistake. Otherwise, you may have issues securing loans and can even access significantly higher interest rates due to the damage a high credit utilization rate may cause to your credit score. However, using a large portion of your credit is only one of the many problems you must be aware of as a potential credit cardholder, and you should be aware of them before you decide to apply for a card. Some of the major drawbacks of credit cards include high interest rates on unpaid balances, the potential for overspending, and various fees that may vary depending on your chosen issuer.⁴ If you mismanage your credit card, you may also suffer from severe debt accumulation that can put you in a more challenging financial situation.
Although the disadvantages of a credit card can be discouraging, you can avoid these problems altogether if you’re responsible with your credit card usage. It can be difficult to pay off the full balance on a credit card on your billing due date, but if you use your card sparingly, you might not have to deal with significant totals when you’re scheduled to make a payment. If you repay your entire credit card balance instead of making the minimum required payments, you won’t have to deal with any interest charges from dividing your bill into multiple installment payments. Since the fees you may cover on your credit card can vary by provider, it is recommended that you find a credit card offer that best suits your finances and doesn’t disrupt your budgetary plan.
Check out the various credit card options from Max CashⓇ partners if you’re interested in getting this payment method.² You can actively work to bypass the problems associated with a credit card if you keep track of your spending and use your credit card efficiently.
Is It Good to Have a Credit Card and Not Use It?
It’s never a bad idea to have a credit card on hand in case you need to use it for a large personal purchase or an unexpected expense you weren’t ready to handle. However, if you plan not to use your credit card outside of those scenarios, you may wonder if you would receive a penalty for that inactivity. Well, not using a credit card isn’t exactly wrong, but it can lead to your issuer closing your account if you don’t use your card after an extended period of time. A credit card provider may not warn you about closing your account if it’s unused for a long time, with that timeframe depending on the issuer’s unique policies.
If you made on-time payments with your credit card and your issuer closed your account due to inactivity, they may report the account in good standing to a major credit bureau. Your closed account’s payment history will stay on your credit file for 10 years after the closing date, but the outcome of that closure typically won’t result in a positive effect on your credit score. If a provider closes your credit card account, it may result in a negative impact on your overall credit rating. It can take a long time for your credit score to drop before the issuer closes the card, but it’s still a potential consequence to consider if you don’t use your credit card for a lengthy span of time.
You might have previously read about the issues of having a bad credit score, so you know how important it is to maintain a strong credit history. If you want a healthy credit standing or keep your account active, you can consider using your card for small or recurring purchases and paying off your balance responsibly. You can also try setting up automatic payments on your credit card for your ongoing expenses if they have that offer available. Whichever technique you choose to maintain your account, you must ensure it stays open to prolong the length of your credit history and keep your credit rating in a good position.
Discover the Best Credit Card Offers with the Help of Max CashⓇ!
After learning the pros and cons of a credit card, you may finally have an informed decision ready on whether this form of payment is right for you. If you think that a credit card is a valuable asset to have, then you can get started on your application by visiting your chosen credit card issuer’s location or website. However, if you want to compare various credit card offers on a single platform, you can take advantage of that convenience by working with Max CashⓇ! You don’t have to leave anywhere to check your credit card options when you can read them all from the comfort of your home.²
Whichever credit card offer you decide to connect with, it is essential that you manage it responsibly if you’re able to get a credit card and start making purchases with it.² ⁵ You can avoid the many problems related to a credit card if you simply follow the best strategies to maintain a stable financial situation as a credit cardholder! Don’t be afraid to unlock your financial freedom today by going over the several excellent credit card options from Max CashⓇ partners.²
