Why You Need Credit Cards

May 28, 2010

Credit cards have been receiving poor reputations over the years.  Most of us have or have had credit card debt.  In times of need, credit cards can be very helpful.  If you’re out of work and can’t pay your bills, using credit cards to survive may be your only option.  There are also times when we use credit cards irresponsibly to purchase random items that we don’t need and cannot afford—this is when we get into credit card trouble!  Credit card companies have also received negative feedback from the public and rightly so in most cases.  Some credit card companies will raise your interest rates without notifying you and they’ll even lower your credit limits (which will negatively affect your credit score by raising your debt-to-credit limit ratio).  Despite how problematic credit cards can be, they play a major role in the health of our financial lives.  Here’s why:

1.  Credit Scores – In order to have a credit score, you need a credit card, in most cases.  That’s why many college graduates will attempt to check their credit scores, only to find out they don’t have one (this is because they do not have credit cards)!  Even if you prefer to pay for all of your expenses using cash, you’ll still need a credit card to establish your credit score (a number that determines what interest rate you’ll receive on loans).  Just because you have a credit card, doesn’t mean you have to use it for all of your purchases!  Use it for small expenditures, like gasoline for your car or for groceries.  Credit cards are great if the balances are paid off every month (but with the current economic downturn, paying off credit card balances is a tough feat).  The bottom line is, whether you approve of the concept of credit cards or not, it is still best to have credit cards for the sole purpose of attaining a credit score.  Remember, you need a credit score in order to obtain a mortgage, car loan, rent an apartment and many employers are using the credit score as a factor in choosing candidates for jobs.  It’s safe to say that credit scores are very important!

2.  Online Purchases – These days, it seems as if anything that can be purchased in a store, can be purchased online!  Most times, you’ll need a credit card to purchase an item online.  Again, for those who prefer cash, simply pay off the credit card balance when it is due and you won’t have to worry about any interest accruing.

3.  Unexpected Emergencies – You’re on road trip and suddenly your car runs out of gasoline!  To make matters worse, you’re traveling through an isolated area with very few stores/shopping areas.  Luckily there is a gas station a few blocks away.  You manage to make it to the gas station only to realize that you don’t have any cash left in your wallet and there is no ATM nearby!  A credit card would solve the problem here.  Now this example is a bit dramatic, but credit cards are especially helpful in emergency situations.

Although credit cards are the causes of many financial problems, they do serve purposes and can be beneficial if used properly.

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