Do You Need Credit Cards? Pros and Cons of Credit Card Use

Credit Cards Can Make or Break Your Consumer Credit Score

Recently I found myself in a rather unique situation. While billions of people struggle with bad credit, I was recently divorced and struggling with no credit. I quickly discovered that this personal finance situation was much worse than having bad credit because there was nothing for banks and financers to judge me on when I applied for credit cards, a car loan, or anything else.

Everyone was advising me to take out secured credit cards, but I didn’t like the idea of going into debt. I wasn’t used to taking care of all personal finance duties on my own and I was concerned with the high rates of consumer credit default, bankruptcy and other problems. I immediately started looking into the pros and cons of credit cards to determine what was best for my new personal finance situation.

Credit Card Pros

There is a reason the consumer credit market is so huge right now. Those concerned with making the most of their personal finance resources have many incentives to hold multiple credit cards. When you read this list of pros it may almost seem like the more credit cards you have the better:

  • Open consumer credit from credit cards that are not charged up high will boost consumer credit scores. Higher scores mean lower interest rates and a much easier time securing loans.
  • Credit cards allow you to make big purchases that you could never afford to pay for all at one time.
  • The more consumer credit you have the easier it is to take vacations and travel. You can put the majority of expenses on your credit cards and pay them off before taking the next trip.
  • You can get credit cards with rewards which give cash back, free airline miles and even free products like laptops and gift cards.
  • Credit cards are required to safely shop online. Since most people shop online today, it follows that most people need credit cards.

There are many other benefits to holding credit cards which individuals could identify for their own personal finance purposes. For instance, some families use their credit to pay medical bills while others use it as a back up plan for food and other necessities if they are short on cash.

For many, credit cards are simply used to splurge on luxury items that would otherwise not fit into the personal finance plan.

Credit Card Cons

Once I started thinking about all the pros to having revolving consumer credit, I was convinced that having at least one credit card on hand would be a good thing. Yet, I was also very aware of the cons that came with holding credit cards:

  • It is very easy to get into credit card debt that ruins your consumer credit score, rather than building it up.
  • It is very easy to overspend when using credit cards since the money is not leaving your bank account right away.
  • You can end up in court with credit card debt if you are unable to pay off everything you charge.
  • There are finance charges on most credit cards which collect every month that you don’t pay your balance off in full.

There aren’t as many cons to holding credit cards as pros, but they are very serious cons to consider. What I realized was that the cons come only when you don’t monitor your personal finance records and use your credit cards responsibly.

I decided that I was responsible enough to use my credit cards for one or two small transactions each month and then pay them back off immediately. This is the best strategy for boosting consumer credit scores, which was my ultimate goal. I went with one secured credit card which later resulted in my approval for an unsecured credit card which did help boost my consumer credit score.

Interested in using your credit cards to boost your consumer credit rating? Here are some tips:

  • Low interest credit cards or 0% interest credit cards will save you money if you do run a balance from month to month. The trick is you will need a higher consumer credit score to get these credit cards.
  • Credit cards with rewards programs will give you extra incentive and personal finance savings when you do need to use them.
  • Try to keep your balances on all credit cards as low as possible, paying them off completely every month as often as possible.