Credit card debt in the US is approaching 1 trillion dollars, and it's no surprise that those of us without one is questioning if it's worth getting one. Credit cards can be an essential part of your adult financial journey. They can help you build good credit, which has many financial advantages and comes in handy for emergencies.
However, credit cards are responsible for plunging a lot of people into crippling debt. A credit card may be helpful in the future, but there are several reasons why it may not be a good option for you right now. Let's take a closer look at them:
1. They come with high-interest rates
You will be charged very high-interest rates when you can't pay your credit card bill at the end of each month. Some credit card interest rates can go as high as 20% or more. On an INR 5,00,000 balance, this would cost you an additional INR 1,00,000 per year. That's a tremendous amount of money to spend just on interest charges.
2. You have a problem with debt
You should not get a credit card if you currently struggle with debt. The high-interest rates and late fees will make your balance quickly get out of control. If you can't pay off your credit card bill each month, the only thing that will happen for you is more debt! Don't use your card to buy items that you aren't ready to pay for just yet.
3. You can't afford the full balance each month
Your monthly statement will show the required full and minimum balance that you need to pay. If your budget doesn't allow enough money for the repayment of full balance every month, you shouldn't get the card. With the high-interest rates, your credit card bill will keep growing month after month and you might find yourself in credit card debt if you pay only the minimum required amount.
4. You lack good credit
If you currently have no credit cards or any type of loan with a good history, it's a good idea to wait until you have a better score before applying for a credit card with a bank. The more credit you have available, the lower your interest rate will be. It may take several months with perfect payments for your credit to improve enough to qualify for a new card without paying high fees and rates.
5. You have poor self-control
If you believe you have bad spending habits, a credit card can make your financial situation worse. It's easy to spend impulsively when you have a credit card in your pocket. A sale in your favorite clothing store or a new tech gadget might tempt you, and before you know it, you've taken on more debt than you can repay. Credit cards are risky if not handled properly, so it's better to wait until you gain more self-discipline.
6. You don't save responsibly
In case you can't figure out how responsible you'll be with your credit card, think about how good you are at saving. The best way to get the costly things you want is to save for them and then buy them. However, if your reason for getting a credit card is only to make large purchases that you can pay off later, you might put yourself at financial risk.
You should get a credit card for the purpose of building good credit. If you want to have enough money for large purchases instead, make saving easier for yourself with online savings account opening. Most digital banking and neo banking options provide a higher interest on your savings than traditional banks, which can help you save more money overall.
Credit cards can be very helpful if used responsibly. However, if you believe your financial situation and spending habits will set up for credit card debt, it will be wise not to get it until you're more financially secure.
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