7 Reasons Not to Have a Credit Card

FT Contributor  | 

Virtually everyone has at least one credit card and one debit card in their wallet, and many people have multiple credit card accounts. Though credit cards are not inherently bad, they could cause financial problems if you are not prepared to manage them correctly.

With practice and enough information, you can learn proper credit card etiquette. However, you should get a credit card for the right reasons and avoid getting one for the wrong reasons.

Here are seven reasons why someone should not get a credit card.

You Don’t Understand How Credit Works

Credit cards can be simple to use. You merely need to swipe the card to make a purchase. However, these convenient payment methods come with a lot of nuances that may be difficult to understand.

Credit is an extremely complex topic, especially for young people or those who have limited experience with finance in the real world.

What could happen if you don’t fully understand credit? If you don’t grasp the concept of interest charges, for example, you could end up accruing a lot of debt.

Secondly, you need to understand how credit card usage affects your credit score. If you do not use your card responsibly, you could hurt your credit score, which would make it more challenging to get loans for a car or home in the future.

Making a few simple mistakes now because you do not have the financial literacy to understand how credit and credit cards work could have a lifelong impact on your finances.

You’re Already in Debt

If you already have credit card debt, another card is only going to hurt the situation.

If you are already finding it challenging to manage existing debt, getting a credit card may not be a good idea. The decision may be more complicated than you might first think.

Obviously, you do not want to build more debt, but sometimes it can seem like a wise decision. For example, some credit card companies offer balance transfers that allow you to get 0% interest for an introductory period.

However, if you do not pay off the balance before the introductory period ends, you will have to pay interest charges and will end up in the same situation as before the balance transfer.

Also, if you are having trouble paying for other debts, such as student loans, a car loan, or a mortgage, opening a credit card account is not a good idea. A credit card will give you another payment to deal with each month.

You Can’t Pay Off Your Monthly Balance

Credit card companies do not require that you pay off your balance each month. However, any remaining balance accrues interest.

Technically, to avoid late fees, you need to make a minimum payment. The card company sets your minimum payment amount each month. It’s usually a small percentage of the overall balance. Any remaining balance accrues interest.

For this reason, it is far better to pay off the entire balance on your card account each month. To pay off everything, you need to have the income and cash flow to pay for all your credit card purchases. If you do not have this level of income, you may want to avoid a credit card.

You Don’t Know Which Card to Get

There are a lot of credit card choices. The problem is that many of these cards are for specific needs. People who want to earn credit card rewards, for example, may be willing to get a card that has an annual fee. The value of their rewards exceeds the annual fee, so they come out ahead.

Other cards are for people who want a low interest rate or who are trying to build a good credit score. If you are not trying to achieve these results, then these cards are a waste of time for you.

If you select the wrong card, you may get hit with an unexpected annual fee or have a low credit limit that means you could be in danger of maxing out your credit card.

Until you know which card to get and which traits you need your card to have, you should avoid applying for a credit card.

You Don’t Want to Pay Extra Fees

If you are careful, you can avoid extra credit card fees. However, there are lots of fees you need to be aware of, and some are unavoidable in certain situations.

Basic fees, such as late payment fees, are simple to avoid as long as you make payments on time. You can even set up automatic payments to prevent forgetting to make a payment manually.

Other fees, such as foreign transaction fees, are impossible to avoid if you use your card while traveling abroad. When you carry a balance from month to month, you will have to pay finance fees or interest charges.

If you use your credit card often enough, you will probably encounter a situation where you have to pay a fee. Some people choose not to get credit cards because they do not want to make an effort to find out about all possible charges and ensure that they avoid them.

You’re Tempted to Overspend

One of the easiest ways to get into credit card debt is to spend more than you can afford to pay. People who keep a monthly balance have to pay interest charges each month. Additionally, if you keep making purchases with your credit card, you build a higher and higher balance, which will bring even more interest.

This snowball effect can quickly make credit card debt unmanageable.

This situation could be easy to fall into because credit cards are easy to use even if you do not have the funds in your checking account to handle them.

If you cannot pay off your balance within a month or at least in a reasonable amount of time, then you may be in danger of overspending. It is best to avoid credit cards until you have the cash flow to pay off your balance in a reasonable amount of time.

You’re Concerned About Your Financial Future

Credit cards can affect your financial future. Most people start building a credit history with a credit card. Banks look at your credit history when you apply for a loan for a car or a home.

On the one hand, properly managing a credit card can help you build a positive credit score. On the other hand, if you aren’t prepared to use your card responsibly, and you develop bad credit card usage habits, then you could end up with a bad credit score that could make it impossible to get a mortgage or buy a car.

Also, you will eventually have loan payments for school, a home, or a vehicle. If you are already struggling with credit card debt, these payments will put even more of a financial strain on you.

If you are concerned about building credit card debt or negatively impacting your credit score, then it is probably best to avoid a credit card until you are ready.


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