Credit: Shutterstock photoWhile credit cards can be a useful financial tool, there are plenty of reasons why someone might want to avoid them. This type of purchase financing isn’t meant for everyone, and if left unchecked can potentially lead to financial ruin. We broke out the five most common reasons a consumer might have for staying away from plastic as a means of payment. These are the key things to keep in mind whenever one is faced by a bombardment of credit card marketing and advertising.
- Bad Impulse Control.Credit cards is that they can be financially devastating in the hands of someone without good self-control. They enable their users to buy things on the fly online, through online mega-stores like Amazon or eBay. With a credit card, users have the ability to make purchases they don’t have the funds for. The cardholder may rationalize that they will come up with the money by the end of the month. However, this doesn't give room for emergency expenses that come up. Over time, this behavior leads users to another key problem area -- carrying a balance.
- Interest Charges.Carrying a balance will cause you to be charged interest. Cash back, rewards, miles and bonuses don't matter if that's the case. Over time, paying interest will cause you to come out with a net loss. The average APR in the United States stands at roughly 17%. If you know you’re likely to carry a balance on your credit card, we recommend not applying for one. The only exception may be people who rely on this extra bit of financing to cover the cost of absolute necessities like food or transportation. In such cases, you should apply for low interest credit cards. These will often come with a 0% introductory APR period that can buy you some time while you get back on your feet.
- Too Many Accounts.Increasingly, banks are turning away individuals who apply for many credit cards in a short period of time. Wait some time before applying, especially if you opened several new credit cards in the last 24 months. This will maximize your chances of being approved down the line. A failed application can result in your FICO 8 score taking a temporary hit, due to the hard inquiry into your credit history. This can be avoided with a little patience.
- Keeping Track of Bills & Statements.Having a credit card opens you up to two risks: fraud and late payments.Both can be tapered if an individual regularly goes through their statements. First, looking at your bill will prevent you from missing a due date. You’re less likely to forget about your card bill if you are frequently monitoring the account. Make it a weekly habit. Also, you should be carefully scanning the items and purchases on your statement – this will help you notice any fraud. Once you see a charge on your bill you didn’t make, you can simply call your issuer and have it reversed. Individuals who don’t stay on top of their bills will struggle on both fronts.
- Design Shouldn’t Be A Decision Factor.Credit cards represent a serious financial investment on your part. They can come with attached costs, and will forever live as part of your credit file. Therefore, it’s generally a bad idea to apply for a credit card simply because it’s made of stainless steel. It may sound strange to some, but this is a major selling point for some cards on the market. Worse yet, usurers usually pay a premium for the upgrade from plastic to steel. Stainless steel credit cards typically cost $450 per year, and have expensive charges for those who want to add authorized users to the account. When selecting a credit card, you should consider how well it fits into how you spend and manage money – not because it looks cool. There's nothing wrong with liking a card's design. You should just factor in other factors appropriately.
The article 5 Reasons Why You Shouldn't Get A Credit Card originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
