If you don’t yet have a credit card, it’s natural to wonder, "Should I get one?" While some people might recommend sticking with a cash-only lifestyle to avoid going into debt, credit cards have lots of benefits if you use them responsibly.
Start with the following considerations, then weigh the pros and cons of getting a credit card to decide if one might be right for you.
How To Tell You’re Ready for a Credit Card
You have to be at least 18 years old to qualify for a credit card in your name. If you're under age 21 and applying for a credit card, you'll have to prove that you have your own verifiable income. Otherwise, you'll have to apply with a cosigner or become an authorized user on someone else's credit card.
Being attentive to your money is crucial when you’re using a credit card. You'll have to be careful not to overspend and to make sure you have enough money for your monthly credit card payments.
Managing your checking account without overdrafting is a sign you may be able to handle a credit card.
Before you apply for a card, it’s important to consider your personality and how likely you are to keep your balance low and make payments on time. "You know you're ready for a credit card when you've managed your money responsibly," said Tae Lee, founder of Never Go Broke and creator of the finance-based family board game Game of Fortune. You should be able to “pay off a credit card balance in one to two months,” she said, although it’s ideal to pay off your full balance each month, no matter how high it is, to avoid paying interest.
Credit cards come with some rules and guidelines to help protect your credit rating. It’s important to stick to these rules, like paying your minimum payment by the due date, to keep your account in good standing. This will also avoid damaging your credit score—a three-digit number that grades your history of using credit.
When You Shouldn’t Get a Credit Card
While you may qualify for a credit card based on your age and income, that doesn’t mean you’re ready for one—or that you need one. You may not be ready for a credit card if you don't have a steady enough monthly income to pay your bill each month. Lee advised against using a credit card as a replacement for regular income, noting that “a credit card is best for small purchases, not for staying afloat."
Borrowing money from your parents each month could be a sign that you're not making enough money or that you're not doing a good job of managing the money you have. If you're already struggling to pay your bills, adding a credit card to the mix could strain your budget even more.
If you have trouble staying organized and keeping up with deadlines, managing a credit card may be difficult. Missing credit card payments can result in fees and have negative consequences for your credit score.
Pros and Cons of Credit Cards
Once you consider the factors above, you can make the big decision: Should you get a credit card? Here are the top benefits and drawbacks of credit cards.
You’ll build credit history
You’ll be shielded from fraud liability
You don’t have to carry cash when traveling
You could earn cash back or travel rewards
You may be tempted to overspend
You could feel more overwhelmed by bills
You may not be ready for the responsibility
- You'll build credit history: You must establish a strong credit track record to access other lending products you might need in the future, such as a mortgage or an auto loan. A simple way to begin building a credit history is by opening a credit card, using it sparingly—say, to pay for a monthly subscription service or for gas—and paying the bill in full each month.
- You'll be shielded from fraud liability: Most credit cards have a zero-fraud liability policy that lets you off the hook for any fraudulent transactions made on your account. In addition, by law, you’re liable for transactions worth no more than $50 that occur before reporting the fraud. With debit cards, you could be liable for as much as the entire amount that was stolen, depending on when you report the theft.
- You won't have to carry cash when traveling: Credit cards are more convenient and safer than carrying a lot of cash in your wallet when traveling. Some credit cards don’t charge foreign transaction fees, which means instead of taking out cash from fee-laden ATMs or exchanging cash at unfavorable rates, you can use your card to make purchases when traveling abroad. Just make sure you pay off your balances as soon as possible.
- You could earn cash back or travel rewards: Savvy users are able to earn credit card rewards that can be redeemed for everything from statement credits to free flights. Even your first credit card could give you the opportunity to earn rewards, though the top cards often require excellent credit. The key is to avoid carrying a balance—that way, your reward earnings won’t be offset by interest payments.
- You could be tempted to overspend: Without responsible spending habits, you might end up with a balance that’s beyond what you can actually pay. A good rule of thumb is to only spend what you know you’ll be able to pay off by the due date.
- You could feel more overwhelmed by bills: If you’re barely getting by while covering other expenses, a credit card might seem like a lifeline, but it could quickly become another growing expense. Before turning to a credit card to save you, focus on streamlining your expenses and building a budget you can stick to.
- You may not be ready for the responsibility: If you don’t know much about credit scores, credit reports, how interest works, and other key credit concepts, you might want to wait to use credit cards until you know more. Improper credit usage could put your credit score at risk, which could affect your ability to get more credit when you need it.
The Bottom Line
If you determine that the time is right for you to get a credit card, it can serve as a vital building block for your credit file and a convenient tool to help you manage your financial life.
However, if you don’t think you’re ready for the responsibility of a credit card, a credit builder loan may be a better option. You’ll make monthly payments that go into a savings account, which you’ll be able to access at the end of the term.