Credit cards are an incredibly common part of most people's financial playbooks. They allow for significant breathing room when it comes to cash flow and allows for purchases that would otherwise be unfeasible.

• Author: Mary Singleton
• Posted: 2024-05-21

However, despite all of the conveniences they provide, credit cards have developed a pretty negative reputation among many circles and for completely justifiable reasons.

So, are credit cards an appropriate addition to your financial future? Well, that's going to depend on a couple of things.

Overall Benefits of Having A Credit Card

Generally speaking, there are three primary benefits to having a credit card:

Helps Build Credit: Your credit score is an incredibly important statistic that will end up dictating your ability to get loans, the conditions under which you receive loans, whether or not you'll be able to rent an apartment, and even whether you'll get a job in some cases. Having a proven track record of paying off your credit card debt in a responsible fashion will improve your credit score dramatically.

Comes With Special Perks: Lots of credit cards out there come with member benefits that would be missed out on if a debit card or cash was used instead. The most common examples of these perks include cash back on purchases and discounts at particular businesses.

Helps Prevent Fraud: When a credit card's involved, it's not just you who's interested in your purchase history. Credit card companies go to a lot of effort to make sure their cards aren't being used for questionable purposes. If they suspect your card information is being used fraudulently, they'll notify you immediately.

What Are The Downsides to Using A Credit Card?

Unfortunately, most things in life come with drawbacks, and credit cards are certainly no exception.

They might be useful for developing a reputation with creditors and might even be able to save you money if you play your cards right, but they nonetheless possess tremendous potential to wreak havoc on your finances if left unchecked.

Credit cards are often a terrible influence when it comes to resisting unnecessary purchases. If you're on a tight budget or are flat broke, then credit cards can take the edge off significantly; at least for a time, anyway.

You'll have to pay that money back eventually and not only that, but you're going to have to pay interest on whatever your balance is, which can end up ballooning out of control. As for the actual interest rate, it's not uncommon for an APR to be upwards of 20%. If your finances are particularly tricky to navigate, that 20% number can make credit card debt evolve from an inconvenience to an all-out inescapable nightmare.

Beyond the interest, credit cards often come with a considerable number of fees. These can include membership fees which are required to be paid once every year and fees that accumulate when a credit limit is passed. Although, by far the most consequential fee is the surcharge businesses place on credit card transactions, some of which are as high as 3% of a total purchase.

Should You Be Using A Credit Card?

Everyone's situation is different, so there are no real hard and fast rules as to whether credit cards are a good idea or not.

Ironically, using credit cards as they're intended is actually a terrible idea. If you're short on cash or are having trouble paying for things, then developing a financial plan to improve solvency is the best course of action. Credit cards simply delay the inevitable in most cases or encourage unnecessary spending. In either case, you're probably going to end up much worse than you were before due to interest.


Still, there are quite a few ways that credit cards can be leveraged to improve your financial circumstances. All it requires is paying careful attention to when you're doing things and why.

Depending on whether the math works out, you can use cash back or discount features on your card to save a decent chunk of money over time. So long as the surcharge isn't too high and you pay off your balance ASAP, you should be in the clear.

Perhaps more importantly, you can use credit card debt as a potential way to improve your credit in the event that you might want to get a future home loan.