For some people, credit cards can be a controversial subject. According to Experian, adults in the United States have an average of 2.35 credit cards, yet credit cards may not be right for everyone. This leaves many Americans asking themselves, “Do I need a credit card?”

Reasons You Might Need a Credit Card

At its most basic level, a credit card is simply one of many forms of payment, such as cash, debit cards and checks. But credit cards offer convenience and benefits in comparison to other forms of payment.

Credit cards typically offer greater security than many other forms of payment. For instance, if your credit card is lost or stolen, nearly all card issuers have a $0 liability policy, which means cardmembers are not responsible for unauthorized purchases on their accounts. If your cash is lost or stolen, you’re less likely to recover it. In addition, credit issuers monitor transactions and can flag something that seems suspicious and alert you, which could help you avoid fraudulent purchases in the first place.

As far as perks go, many credit cards allow you to earn valuable rewards in the form of cash back, miles or points. Plus, credit cards can also offer you helpful benefits, such as extended warranties, purchase protection and car rental insurance, to name a few.

Finally, a credit card also allows those who are new to credit to build their credit history. Having a strong credit history and a high credit score is vital to applications for auto loans, a home mortgage and other types of loans.

Factors Against Having a Credit Card

Despite all the advantages of having a credit card, there are other factors to be aware of.

For example, credit card users have the potential to accumulate too much debt if their accounts are not managed responsibly. When you use cash, you’re unable to spend cash that you don’t have with you, but with credit cards, you’re a bit more removed from handing over $20 bills and it can be easier to charge more than you’re comfortable repaying.

Credit card accounts can also mean fees. For example, if you carry a balance month-over-month, you may be charged interest on your purchases according to the credit card’s APR. If you use your card to get cash, most credit cards charge a cash advance fee that is typically greater than what you might pay when using an ATM card to access cash. You will also be charged interest according to the accounts cash advance APR. You can also be charged a late fee if you fail to make your payments on time each month. However, checks and some debit cards can also have their own costs, such as overdraft fees.

Finally, credit cards have the potential to hurt your credit when they aren’t managed responsibly. For instance, if you incur too much debt, or make your payments late, your credit score will suffer. This isn’t a risk that you take when using cash and debit.

Bottom Line

The popularity of credit cards shows that most Americans find that the rewards and benefits of cards outweigh the costs and risks. Ultimately, credit cards are not always the best form of payment for everyone or every purchase, but can be valuable financial tools when used responsible. By understanding how a credit card differs from other forms of payment, you can make the right choice for your needs.

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