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Credit cards come with many benefits, but managing one is also a big responsibility. If you use it well, a credit card can help you build credit, have flexible payment options and potentially earn rewards on your spending. On the other hand, credit cards can also lead you into high-interest debt if you don't pay off the balance each month.
Ultimately, the decision of whether to get a credit card will come down to your personal financial situation and goals. Here's what you need to know.
Why Should I Get a Credit Card?
Credit cards can help you build credit history, benefit from fraud protection and potentially earn rewards. Here's a breakdown of reasons to get a credit card:
- Build credit. Charging purchases and monthly expenses such as utilities to your credit card can help you build credit. Good credit can be important when you need to take out a loan, rent an apartment or even apply for a job. To ensure your card helps your credit rather than hurting it, set up autopay to ensure you pay your credit card bill on time and be sure to pay off your balance in full each month to avoid accruing interest.
- Get added security. Credit cards generally offer better fraud protection than debit cards do, meaning you may have an easier time recovering funds in the event of credit card fraud. Federal law limits your liability for unauthorized charges to no more than $50 per credit card, as long as you act quickly to report the theft.
- Earn rewards. Rewards credit cards offer perks like cash back on purchases, airline miles, hotel points and more. As long as you pay off your balance each month, a rewards credit card can help you get more out of the spending you already do.
- Finance large purchases. If you're able to qualify for a credit card with a 0% intro annual percentage rate (APR), you can use the promotional rate to pay for a large purchase and flexibly repay it over time. This strategy goes even further if your card comes with a welcome bonus, which gives you added rewards for meeting a spending requirement in a set timeframe.
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When Getting a Credit Card May Make Sense
Getting a credit card might be a good idea if you're confident you can manage your spending to avoid paying interest, and want the benefits credit cards offer. Here's when it may make sense.
You Want to Build Credit
If you have poor credit or a limited credit history, getting a credit card could help you build credit. To start, you'll need to pick a credit card that's a good fit for your credit profile—more on your options below.
From there, use your credit card for small purchases and pay off your balance in full each month to avoid paying interest. Be sure to pay on time, every time.
You're Turning 18
You may be able to get a credit card when you turn 18, and it can be a great way to enter the adult world of managing credit. Establishing credit can help you lower barriers to other milestones, such as renting an apartment on your own.
That said, if you're under 21, you'll need provable, independent income or a cosigner to qualify for a credit card.
You're Already Managing One Card Well
If you're already confident in your ability to manage one credit card, you might decide to up your credit-building game with another. There's no one-size-fits-all answer to how many credit cards you should have, but opening an additional card may benefit those with savvy money management skills. A new card may be a way to lower your credit utilization and maximize your rewards, but tread carefully—more credit presents more risk of overspending.
You Can Stick to a Budget
You should only open up a line of credit if you're confident you can stick to a budget and pay the balance off each month. If you're short on cash and struggling to save, getting a credit card is risky business: It may feel like a quick fix when you're low on funds, but adding debt and the interest charges that come with it could hurt your financial situation.
You Want to Consolidate Debt
Are you paying off debt? A balance transfer card may help you get out of debt faster and avoid losing money to interest. Keep in mind that balance transfer cards usually require a good or excellent credit score.
Learn more >> Pros and Cons of Credit Cards
When Getting a Credit Card May Not Make Sense
While there are numerous benefits linked to credit cards, they can hurt your credit and lead to debt if mismanaged or used for overspending. Here's when getting a credit card may be a bad idea:
You're Worried About Overspending
Overspending on a credit card and incurring debt can put a lot of strain on your finances. Once you're in debt, getting out can be challenging. Average APRs on credit cards can be above 22%, and when interest is accruing at a high rate, paying down your balance becomes more expensive.
You Could Damage Your Credit
A credit card could end up hurting your credit if you miss payments or max out the card. Credit card issuers report payment history and credit utilization ratio to the credit bureaus each billing cycle. That can help your credit score if you're keeping your utilization low and making on-time payments—or damage your score if you're not.
When the Fees Outweigh the Benefits
Annual fees, late payment fees, balance transfer fees, over-limit fees and more can quickly add up. You may be able to avoid many of these fees by managing your credit card responsibly. For example, you can avoid late fees by setting up autopay on your credit card, and you can avoid annual fees by opening a card that doesn't charge them.
Learn more >> Mistakes to Avoid When Using a Credit Card
How Can I Get a Credit Card With No Credit History?
You may be able to get a credit card with no credit history, but you're more likely to qualify for an account designed specifically for building credit. Here are some options to consider if you have a low score or no credit accounts:
- Become an authorized user. Asking a trusted loved one to add you to their credit card account as an authorized user could help you build credit. Authorized users get a credit card of their own to use, but for this to benefit you, the primary cardholder needs to make on-time payments and keep the card balance low.
- Apply for a student credit card. Student credit cards may be an accessible way to start building credit while you're in school. That can help you graduate with a good credit score and a financial head start.
- Consider a secured credit card. A secured credit card requires you to put down a cash deposit to qualify. Your deposit is usually equal to your line of credit. By using the card responsibly and making on-time payments, you can build up your credit history and open the door to an unsecured card (plus potentially get your deposit back).
The Bottom Line
Using a credit card responsibly is one of the best ways to build a strong credit history—something that can help you score the most favorable rates on big loans for cars and mortgages, pay less for insurance, get access to more housing options and more. All in all, building good credit can save you money when you need to borrow down the road.
Before you decide to apply for a credit card, start by reviewing your credit report and FICO® Score☉ for free through Experian. You can also sign up for free credit monitoring, which has the added benefit of showing you personalized insights on actions to take to improve your credit.