Hi everybody, I’m Judy Copenbarger and I’m glad you’re here. Let’s discuss credit cards.
Why would we want to have one and then why wouldn’t we? There must be something to it since they’re so popular, so let’s learn more about them and explore the pros and cons of credit cards. Why would anyone want a credit card?
They’re so confusing and there’s a lot of strange vocabulary you have to learn to even understand the complicated paperwork that you get with a new credit card. Okay, they aren’t all terrible, in fact, for a lot of people including myself they make a lot of sense, financially.
What Are the Pros of Credit Cards?
The first and greatest benefit to all of us is that we can use credit cards to build credit. But who would have guessed that!? We do need credit for many of the larger purchases that we make in life that take part in achieving our dreams. We need loans for small businesses when they’re just starting out and that dream house that will support you and your entire family. Your dream home probably won’t be affordable without some sort of bank loan and even some apartments require a credit check to see how reliable a renter you might be. By making purchases and paying off your credit card every month you’ll begin to build a positive credit history with credit lenders.
Security and Purchasing Power
Credit cards provide flexibility in life and protection in the event something goes wrong. Often your credit cards will include insurance for purchases and support in case there’s card theft or fraud. And you can get your money back easily in the event that something goes South. And this can give you peace of mind.
It helps you remain flexible by giving you purchasing power when you need it. When emergencies happen, and things go South, it’s nice to be able to make those purchases now and plan to pay them off later.
Many credit cards have the benefit of giving you rewards for spending with that card in the form of points or even cash-back! Which reminds me, I have some airline points to spend on vacation! Also, credit card companies usually make many business alliances with some of your favorite brands, and this results in discounts for you on these brands and all of these experiences. They are great for traveling and you can use them worldwide. Find a card that matches your lifestyle.
What Are The Cons of Credit Cards?
They’re Too Easy To Use
Credit cards can’t all be good, can they? Well, the true danger of credit cards is how easy they are to use. You can build debt quickly to the credit card companies. On top of what you pay there’s also an interest rate on the money you don’t pay off. You’ll also need to make sure payments are on time. Late payments accompany additional fees and will negatively impact your credit score. But fear not though because just by reading this article you’re learning how to make educated financial decisions.
Another disadvantage of a credit card is that it can be costly to get cash advances from an ATM machine. Consider using your credit card with a plan. Know exactly what purchases you can make that help you build credit responsibly.
How to use credit cards responsibly
I wouldn’t recommend even considering a credit card if you’re living beyond your means. Ask yourself, “Can I consistently pay off my credit card bill every month?”. If you can’t say yes then don’t go for it.
The 2X rule of saving
Let me tell you a story that my dad told me when I was a kid. It’s the rule of 2X and when I would ask him “should I buy this dad?”, “Should I plan on this?”, he would always say “go back to your rule of 2X”, and here’s how it goes.
Anytime you’re gonna take on a major payment, buy a car, a major appliance, or some major purchase with your credit card you want to be able to afford twice the payment that you’re signing up for. Even a house payment that would apply.
So if you’re borrowing money for something and you can afford to pay twice what that monthly payment is you’re never gonna be in financial trouble.
If you’re gonna skinny it down and you don’t quite have that margin for all the unexpected things that happen in life when the garbage disposal goes out or when you have to maintain that car that you’re paying for that’s when you get in trouble! So, this is a rule that will help you at your home. Thanks, dad!
Related article: How to Get My Finances in Order – A Step by Step Guide
That’s the pros & cons of credit cards in a nutshell. Consider carefully if you’re ready to use one responsibly and with a plan in order to build credit for your future dreams. I’m really excited to share financial advice with you please share this article if you found it helpful, and comment below if you have any questions about credit or credit cards. You can follow me for more financial discussions and I’ll see you next time.
I’m Judy Copenbarger, have a blessed day!
Judy Copenbarger is the Founder and President of Comprehensive Financial Services, based in Irvine, California.
She holds a Juris Doctor Degree, with a Taxation Emphasis, is FINRA Registered and maintains various Securities and Insurance Designations. Her professional expertise is in Estate Planning, Retirement and Education Planning.