Why do I have a credit card?

I am for and against the personal ownership of credit cards. I incurred my own amount of credit card debt when I was younger and just recently was I able to rid myself of these debts. I am all too familiar of the negative effects of how credit cards can hurt an individual or even an entire family. But before I completely ban the use of a credit card from my livelihood I also had to consider the good a credit card can do for me.

• I want to purchase a home at a reasonable mortgage rate. I understand the rate is tax deductible, but I still want to be able to afford what I own. So I want to improve my credit score as much as possible by the time I walk to a bank and ask for a home loan.
• I want to build a better budget plan. All bills are automatically deducted from the credit card (except for electricity at the moment). To ensure I pay no interest on bills, I pay off the credit card before the month ends. So while I pay two or three bills, it’s as if I’m paying one lump sum off of the credit card. It helps my financial report look at bit cleaner as well.

One thing that I always make sure of is that I have the money before any transactions are made. I’m nearing my one year anniversary of owning my credit card and I haven’t paid a single penny in interest yet and I hope to keep it that way for as long as I have the card.

• A Credit Card is not an Emergency Fund (at most an absolute LAST RESORT) - Build yourself your own emergency fund in an account that pays you interest before using a card that will charge you interest. A lot of people have stories of using credit cards to pay off bills or repair cars all because they didn’t have enough money in savings to take care of it on their own. This is the importance of having an emergency fund, so you will be able to have those funds available for when such situation occurs and you won’t have to bury yourself into an even deeper hole in debt.
• A Credit Card is NOT Free Money. So you just got yourself a new credit card with a $5,000 credit limit and you are ready to go out on the town and purchase those brand new $500 pair of boots, or maybe you guys want to $800 gadget. So excited over your purchase, you buy a new outfit to match the boots or you get all of the accessories to your gadget to REALLY impress those friends of yours. Three months later you open your mailbox and see a bill for the items you purchased with an incurring interest charge. Your eyes popped in amazement as you say, “But I purchased these on credit!” It’s amazing how common that story is.
• A credit card is not for the unstable. Be honest with yourself. How is your handling with money? Good, bad, not so great? Think of the last loan you borrowed from a family member. Did you pay it back on time or did you ask for a couple of more weeks? Have you even paid it back at all? If you are honest with yourself and you can say that you are not so great with handling your finances at this moment, then maybe it isn’t the best of ideas to own a credit card at the moment, because all it takes is one mistake to put yourself in a pretty bad position.

This entry is not designed to persuade to go get yourself a credit card, neither is it designed to say don’t ever touch one again. I am only explaining why I have one and the benefits it has brought me along with complete awareness to the risks involved if I do not stay up-to-date.

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