What are Credit Cards? Also, Should I Have One?

Chances are you already know what credit cards are. If you don’t, here is a simple explanation. Credit cards allow you to buy things and pay for them later. If you know what credit cards are, feel free to skip over this next paragraph.

Ex. Say you bought a new pair of UGG slippers on December 10th with your credit card for $100. When the end of the month rolls around, your credit card company would send you a statement that your credit card currently holds a balance of $100. They’ll give you until the end of January to pay off the balance of $100, but if you don’t, they’ll charge you interest on that $100. This means that unless you pay off your statement balance, you are actually going to end up owing more than the $100 you originally used to buy the shoes. And this can continually compound over time which means you’ll owe more and more money. A big no no in personal finance world.

Anyways, now that we all know what credit cards are, the question becomes, “Should I own one?”. The answer here requires a little inward thinking but let’s get real.

If you are going to spend more money than you would normally because you “aren’t spending your money”, do not get a credit card. What happens in this situation, is that you are going to end up overspending and carrying a balance (not paying your statement balance each month) and said credit card company is going to continually charge you interest on this balance. Yes, by not getting a credit card you are sacrificing on credit card points, but more importantly, you are NOT overspending.

If you are going to keep yourself restrained and only spend what you can afford, then a credit card is probably right for you. Get your points, miles, cash back, rewards, etc. etc. etc.

If you find yourself with a credit card and overspending, maybe just stop using it for a few months to kind of reel yourself back in. Either way, always be careful when using credit cards because they can really be a silent killer.

Be safe!