Key takeaways
- Credit cards are powerful financial tools that have helped millions of consumers build and rebuild credit, earn rewards and pay off major purchases over time.
- But when used irresponsibly, they can also cause consumers to slip into vicious debt cycles that can be hard to get out of.
- If you’re on the fence about getting a new credit card, be sure to consider your spending habits and financial situation, as well as what you’re hoping to get from a credit card, before you apply.
Whether it’s your first or fourth time applying for a credit card, opting for a new card is a decision that will impact your financial health in one way or another. Having a credit card can be an asset when it comes to building or maintaining a good credit history, but it can also be a gateway to debt, depending on what type of spender you are.
The decision to apply for a credit card shouldn’t be taken lightly. Your credit history isn’t something you can erase down the road, so it’s important to analyze your personal spending habits and financial goals prior to using a card to build or rebuild your credit.
Also, keep in mind that current credit card interest rates are high — over 20 percent, in fact. If you do get a credit card, be careful not to carry a balance on it or engage in irresponsible spending. Racking up a balance may cause you to become stuck in debt, which ultimately could destroy your credit score and financial health.
If you’re wondering, “Should I get a credit card?” this guide can help you understand when getting a card could be beneficial and when you might be better off without one.
When does getting a credit card make sense?
Credit cards can be valuable tools in navigating and managing your finances. Here are a few scenarios where it might make sense for you to apply for a new credit card:
If you want to build or rebuild your credit history
Used responsibly, a credit card can help you build the credit history you need to access financial support. Without sufficient credit history, lenders will likely see you as a higher risk — which may result in denial of that loan or mortgage you want.
If you want to increase your credit score
Credit cards can be one of the easiest ways to help you improve your FICO credit score. In addition to building a positive credit history by making your payments on time, your credit score will likely increase due to factors like credit mix and credit utilization ratio.
You know, use a low utilization ratio — below 10 percent, really — to boost your score, and pay your bill in full and on time. Do that for seven or eight months and you’re going to see some progress.
— Beverly Harzog
Some issuers offer pathways to help people transition from a secured card to an unsecured card after responsible use.
If you need help financing a purchase or paying off debt
Credit cards with a 0 percent introductory APR offer can provide temporary relief in financing a major purchase or paying off debt.
If you want to get rewarded for your spending
Using a cash back or travel rewards card responsibly can also help you save money. Choose a credit card that offers rewards on purchases you make the most.
If you want added payment security
Credit cards offer added payment security compared to debit cards in case of fraudulent charges.
When does getting a credit card not make sense?
While many good things can come from getting a new credit card, it might not be the right time for you to get one. Here are some situations where it likely doesn’t make sense for you to get a new card right now:
If you have difficulty controlling your spending
A credit card can be great for funding large purchases with a 0 percent APR offer, but it’s not ideal for covering purchases that consistently lead to carrying a balance.
There is one other situation where you should never get a credit card. And that’s if you can’t use cards responsibly. If that’s the situation, you should not use a credit card.
— Beverly Harzog
If you’ve recently applied for a major line of credit
Avoid applying for a new credit card if you’ve recently placed or plan to place another major credit application. This can decrease your credit score and make lenders suspicious.
If you already have too many cards
Having multiple credit cards can make it difficult to manage your finances and may lead to overspending. Consider your budget and goals before adding another credit card to your wallet.
The bottom line
Opening and managing a credit card requires diligence and an analysis of your resources and spending habits. By using your credit card responsibly, you can start to build credit and reach your financial goals.