Should you really own a credit card?
To answer that question, you need to know whether you’re disciplined enough to have one. I know plenty of credit card holders who are always trying to max out on their limit, and I understand that temptation, but that’s what banks want you to do.
Ideally, you should only use your credit card for investment purposes, improving your credit score in order to finance a mortgage, or buying essential items like gas and groceries. Then, if you can afford to do so, pay your balance at the end of the month to avoid interest charges. Credit cards also come in handy in case of emergencies (again, if you can afford to pay the monthly balance).
If these kinds of tasks are what you use your credit card for, by all means keep doing so. However, there are a few instances where it would be a bad idea to own one.
The first would be if you have a lot of debt on your hands. If you’re undisciplined with your spending and you buy whatever you want with your card, you’ll only put yourself further into debt.
The second would be if you don’t have the income to pay off your balance. For example, if you have $500 in your bank account but your credit card limit is $1,000, you don’t want to spend over $500. Additionally, credit cards have interest rates attached to them, which means you’re getting extra charges on your balance. After a while, those charges really add up.
Also, if you have multiple credit cards and their combined utilization rate rises above 30%, that will harm your credit score.
If you need a credit card but you also know you’ll have a hard time being disciplined about how you use it, you can apply for a secure credit card from your local bank. With a secure credit card, you can only spend what you put into it. Essentially, it acts like a debit card but gives you all the advantages of a credit card.
If you have any more questions about credit cards or how to use them responsibly, comment below with the word ‘overspend.’ We’d love to hear your thoughts!
As always, if you have any real estate questions or you’re thinking of buying or selling a home soon, don’t hesitate to reach out to us as well. We look forward to speaking with you.