Most adults will tell you it’s important to have a credit card, but is it really necessary to have one in the modern era? Credit cards can be useful for emergency spending and for building credit, but could you technically get by without one? If so, is it better to simply not have a credit card, or have one but rarely use it?
The answer isn’t straightforward, but once you better understand how credit cards work (including their advantages and disadvantages), you’ll be able to make an informed decision for your own financial health.
How to Get a Credit Card
Getting a credit card isn’t hard, though some credit cards are more beneficial than others—and are therefore harder to get. Typically, you’ll be able to apply for a credit card with any financial institution (like a bank), or apply for one you’ve been preselected for. You tend to get these in the mail.
The card you qualify for will depend on your credit score and several other factors. That said, you can qualify for a credit card even if you have bad credit; you might face a higher interest rate, a lower credit limit, or stricter terms and conditions to compensate for this. In any case, the process is pretty simple, and accessible to anyone.
Main Reasons to Get a Credit Card
So why would you want to get a credit card? There are a few main motivations:
- Emergency purchasing. Credit cards are ideal for making a necessary purchase if you don’t otherwise have the funds to pay for it. For example, if the roof of your house caves in and it’s going to cost $10,000 to replace, but you only have $8,000 in your savings account, a credit card can help you cover the difference. This isn’t strictly necessary, since you might be able to take a loan out in some other way, but is extraordinarily convenient.
- Credit development. Credit cards are also the best way to build your credit score. Your credit score is a reflection of your financial trustworthiness, and it’s going to dictate which loans you qualify for and what interest rates you’ll pay, among other factors in your financial life. The higher your score is, the better. Making purchases and paying off your debts regularly will help you establish a stronger credit score. Again, there are ways around this; you can take out small loans, or pay off a house or car, but credit cards are much more convenient.
- Buyer protection. Credit cards almost always come with some level of buyer protection built-in. If you buy something online but never receive it, or if your product is defective but the seller is refusing to issue a refund, you can start the chargeback process with your credit card issuer. You can also get buyer protection with a debit card, but this is a practical necessity for engaging securely with online vendors in the modern era.
- Extra perks. Some credit cards also come with additional perks, such as bonus frequent flyer miles or cash back rewards. These aren’t strictly necessary, and it’s entirely possible to get by without them. However, if you use them intelligently, you can end up ahead.
The Downsides of Credit Card Ownership
Now let’s look at the downsides of owning a credit card. While occasionally, you might see a card with a standard fee, this is the exception, not the norm. Ordinarily, there is zero downside to owning a credit card and not using it. You won’t accumulate interest unless you purchase something. Your credit score will benefit from the additional unused credit. And as long as you’re paying attention to your statements, you’ll be protected from any instances of fraud.
However, if you abuse your credit card in any way, like maxing it out, only paying the bare minimum each month, or failing to pay your bill at all, it can be detrimental to you. Compound interest and missed payments can make you pay much more money over time and can wreck your credit score. Do note that these negative consequences only arise when you use your credit card irresponsibly, so it’s not something you have to worry about.
The Bottom Line
It’s possible to get by without a credit card in the modern world, but it’s not recommended. All the benefits you get from having and regularly using a credit card can be gotten through alternative methods; they just happen to be far less efficient, or harder to access. The only downsides to credit card ownership come into play when you’re using too many of them or are using them irresponsibly, so you shouldn’t be afraid of them. Instead, aim to take on one to two credit cards to earn the benefits without overextending yourself.