5 Reasons You Need A Credit Card
Are there really benefits to having a credit card? Absolutely, and here are five of those reasons. Take a look and decide whether or not you need a credit card.
1) They Improve Your Credit Score
If you want a high credit score, you have to have a credit card, it is as simple as that. The reason for this is that the credit bureaus want to see that you can handle a variety of credit. Credit cards, also known as revolving credit make up a huge part of your profile.
The trick is managing these credit cards, because they can do as much damage as they do good. Keep your credit card balances or credit utilization under 10 percent and pay your bill on time.
2) They Are Handy In An Emergency
In an emergency, money is usually something that is needed and needed fast. Hopefully, you have an emergency savings but even if you do, money may not be instantly available.
Credit cards provide immediate funds for an emergency. Having one in hand can allow you to pay for your emergency expense quickly, giving you time to transfer other funds out of your online savings or investment account.
3) You Can Earn Points & Miles
The ability to earn points is one of the best gimmicks that the credit card industry ever came up with. Just use your card on purchases and get airline miles or points that you can use for other purchases.
This is a great gimmick in that it gets people to spend money. The credit card companies then hope that you will simply carry the balance, paying monthly interest. More often than not, this works to their advantage.
As long as you are disciplined though, you can use the credit card companies games for your profit. Put your normal purchases on credit cards and collect your points and miles. Then, pay off your statement in full each month and enjoy your free money.
4) Get Cash Back For Purchases
Even better than points or miles is cold hard cash. Who wouldn’t want anywhere from two to five percent back on their purchases?
Cash back is a major perk of owning a credit card, but you have to treat this perk with caution. Pay off your balance when you get your statement and you will be just fine. Don’t fall for the trap of purchasing more than you will be able to pay off or buying things that you would not ordinarily buy.
5) Credit Cards Offer Fraud Protection
If you get ripped off with a cash or check purchase, you are more or less on your own. Even a debit card transaction is risky because it will lock up funds in your account until your bank investigates.
With credit cards, you are protected from fraud. If you need to make an online purchase, for example, put it on credit card and get extra protection. If something goes wrong, a credit card company will generally give you a temporary credit while they investigate.
Getting Your First Credit Card
Obviously credit cards are important, but how do you go about getting one. If you do not have one right now, you are probably just starting out in the credit world. So, for those of you who are struggling to qualify for your first credit card, here are some things that you can do.
Get A Store or Gas Card
Credit wise, a store or gas card is not going to help your rating as much as a Visa or MasterCard, but it can be useful as a stepping stone. Getting one can give your credit score the boost that you need to qualify for some real plastic. They are also fairly simple to qualify for.
Once you have your gas card, use it to make some regular purchases each month. Nothing out of the ordinary, just things that you would normally buy with cash. Put them on the card instead and then pay off your statement every month. Within about six months, you will likely be able to qualify for your first real credit card.
Open A Secured Credit Card
A secured credit card is one where you put down money as security. The amount of your credit line will generally be the amount that you put down. Put down 300 dollars and get 300 dollars in credit. It is simple as that.
The great thing about secured credit cards is that they are incredibly easy to qualify for. As long as you have the money to put down, your approval is generally going to be guaranteed.
Once you have your card, use it for six months and build up some history. You can then open an unsecured account, close your secured card and get your money back.
What To Look For In A Credit Card
When you are first starting out with credit cards, you are unlikely to he able to get the best perks. Having said that, there are some benefits that you may qualify for and should look for.
No Annual Fee
There are a few cards out there with annual fees that are worthy, but these are usually cards paying back huge rewards in the form of miles or cash back. The people who will qualify for these cards will have excellent credit.
In general, if you are new to credit cards, avoid those charging an annual fee. These are usually companies trying to take advantage of those with lower credit scores. It would be better to put down money with a secured card than to take a card with an annual fee, at least you would eventually get your deposit back.
Just because you are new to credit does not mean that you can not find a card that will give you some nice perks. This is especially true if you have done a good job building your credit with a secured card or gas card.
When choosing a card with perks, choose what is important to you. If money is your thing, obviously a cash back card would be the way to go. Should you be a traveler, however, an airline mile card might be a better choice. If you actually use the airline miles, the rewards you get will probably have a higher value than straight cash.