Credit Cards: Avoid at all Cost? A Necessary Evil? Or A Helpful Tool?

Credit cards are fairly easy to obtain. Identity thieves have proven that time and time again. They are also pretty easy to use which can either be a convenient short cut or a road to long-term debt. Let’s look at the good, the rewards, the bad and the really ugly about credit cards.

There are some financial experts who say avoid credit cards altogether, like the plague. Many experts though agree that we should all have at least one credit card for emergency purposes. The picture that arises for most of us is unexpected car trouble when traveling. Even if we have the funds to cover the repair, many places aren’t going to accept a check from an out of towner for these costs. This is when a debit card would surely do the trick, if your checking or savings balance can cover the cost and not leave you broke for the month. That just isn’t an acceptable risk for most of us.
The convenience factor is another reason for being a credit card holder. Not necessarily for shopping in general but for making reservations whether for tickets, a rental car or a hotel.
If you’re convinced, as most of us are that having at least one credit card is a good idea for both emergencies and reservations, then what are your best credit card options?
Big Guys in the Credit Card Arena: Visa, Master Card, Discover & American Express
First let’s consider universal acceptance.
Master Card and Visa are generally universally accepted.
Discover and American Express are not as widely accepted. Both offer some great features but if they are not the best options for an “only” credit card as you may find yourself “unaccepted” for credit in some venues.
The good news is that if you’re credit is good you can obtain a Visa or Master Card often with a lower rate (something like 15% annually would be considered lower). Often you can even find offers for zero interest but enjoy and watch it, when this offer expires it will jump to a higher rate (something like 18% or more).
The good news: more widely accepted
The rewards: sign up offers like lower or zero interest
The bad news: low rates will jump after introductory period
The ugly: watch out for hidden fees and especially avoid late payment fees
The really ugly: if you just make minimum payments, it’ll take a financial forever
Store Credit Cards: Are they ever worth it?
Store credit cards generally work at only one store or the store’s online shopping web site and are another credit card venue. They are really easy to obtain and although the interest rate is higher, they do generally offer incentives like a percentage off of a purchase today. Examples would include Kohl’s.
The good news: easy to obtain, can help the young or new to credit establish credit
The rewards: a percentage off for the first purchase, discounts at on line stores
The bad news: higher interest rates
The ugly: so easy to use and sales are so enticing
The really ugly: if you spend more than you can pay off in a month, the high interest rates are a killer
What to look for in any credit card:
Low interest rates
No annual fees
Incentives like frequent flyer miles or rewards like Amazon Rewards
The bottom line is that if you carry a credit card for emergencies, then only use it for true emergencies and whatever balance you put on a credit card know that you can pay it off within the month or within the no interest period.
Of course having a Monthly Budget Meeting can help you stick to these credit card goals and always take advantage of opportunities to transfer existing high interest credit card balances to low or no interest cards and heavily note the end of the term.
Credit cards should be used reluctantly but can be helpful tools for emergencies, establishing credit or building rewards but credit cards require diligence. Don’t let what’s in your wallet be a breadcrumb path to debt.