I have heard many a people say that they don’t need - or even want - credit cards. Many proclaim they are bad, and many say that they’re good. Both sides of the argument have valid points in some instances, but not all points made in the argument apply to everybody. Here’s my stance on the subject…

 What the ‘credit cards are bad’ people tend to say is that credit cards lead to financial problems. People will use cards, max them out on buying luxury goods and either fail to make timely payments, or get buried under mounds of interest fees and eventually, it leads to a financial breakdown. Many people I know live this type of lifestyle, charging what they really should not be spending money on. Some people do it to impress others, some people do it because it makes them feel better (until the bills roll in), others do it because they don’t realize they don’t have the money. I agree with this points.  Maxing out credit cards is never a good idea, especially if you can’t afford to pay it off.

Unfortunately, many people who say that credit cards are bad also refuse to take the time to properly educate themselves on how credit works and what it means.  Some of my friends max out their credit cards and don’t realize the repercussions; paying interest, for example. Sometimes they have the money to pay off their card in full, but don’t because they don’t realize they are paying interest. Proper education on credit card usage is vital - without being aware of how credit cards work, and how to responsibly manage them, it’s very likely that people will find themselves in problems.

What the ‘credit cards are good’ people tend to say is that credit cards offer flexibility and convenience. Being able to pay with a credit card is a convenience for most people; being able to pay at the pump, purchasing items online, utilizing 0% APR offers for larger purchases or balance transfers. Utilizing credit cards allows people the flexibility to pay over time, and a lot of smart credit card users will only do this if it’s on a 0% APR offer and they have a specific reason to not pay off their card in full. I also agree with this point. Credit cards are incredibly useful and convenient.

In addition, credit cards tend to be more secure than carrying around cash. A simple call to a credit card company if one has been lost or stolen will put a freeze on the card, or cancel it completely, and a new card can be issued. Many issuers don’t even hold you responsible for the charges made. If you lose cash, there isn’t anybody to go to for the most part.

All the above being said, I think that credit education is the single most important factor when deciding if a credit card is a good idea for you. Read about credit cards, how to use them responsibly, and start out small. Don’t go on a spending spree, and pay off your card in full every month to avoid paying interest. As with many things, moderation is the key. I don’t buy something on credit unless I can afford to pay cash for it. I use credit very frequently because it is convenient, I can pay my cards off a few weeks after the purchase and thus earn some interest on my money, and it helps build my credit history in a positive way. Building up my credit history is important if I want to apply for a home or car loan. Take the time to get educated before you decide to use credit cards, and make sure you are aware of your spending - then your credit cards will help you instead of hurt you.

I recently made a page that has my credit card picks on it. On it I have a few different sections - Student Cards, Rewards Cards, and cards conducive to Balance Transfer options. As time goes by, I’ll be updating that list with more cards and bad cards will be removed. I will take suggestions on cards that I should add on to there.

Part of building financial responsibility is being able to use credit cards responsibly as well. Overspending on credit cards can lead to financial difficulties - I have seen it firsthand and have read about it on other blogs Applying for credit cards just for the heck of it is a good way to take some hits on your credit score and, if you need a good score to get a loan, it is probably a good idea to not to apply for new credit close to the same time that you are applying for a loan.

Overall, be responsible when dealing with credit cards and do NOT overspend. I’ll be making an update later this week about the importance of budgeting and how it can impact your financial success.

Earlier this morning I called in to my credit card and requested a credit limit increase (CLI). I ended up getting a 50% increase on my card; a relatively huge boost for me considering I have three cards and this one had the highest limit on it to begin with.

Getting CLI’s is a good way to help your credit, IF you handle it with care. Just because I got an increase on my card doesn’t mean that I will be using it more. I still will carry no balance on that card, even though I “could afford” to charge everything and pay it off month by month…of course, I’d have to take a hit on my credit for a while.

Why will getting a CLI help my credit? Look at the picture below:

Part of the ‘Amounts Owed’ also looks at your overall utilization - how much of your credit you are using in relation to how much you have available. By getting more available, I am utilizing less of my credit percentage-wise.

There are other things to help you keep your credit in good standing. As you can see, your payment history is the most important factor. Not paying your bills on time severely hurts your credit, as does maxing out your cards even if you do pay the minimum each month. For that reason, I pay off my cards in full every month no matter how much I have on there. Sometimes it’s hard to remember that I don’t necessarily have all the money I need to pay for something in the bank, and that’s where most people will run in to trouble.

Credit History is the one thing that me, and most other college students, are getting the shaft on. There’s no way for us to really improve that because of its nature; the longer your history is, the better it is for your score. It shows that you can manage credit over a period of time. Being added as an Authorized User on a card of your mom or dad can help this, as it should show up on your credit report as being your card also; thus, if they’ve had a card for 10 or 15 years, it’ll show that you’ve had the same. I even heard of somebody who was 18 have a credit history of 20 years because of that! Be careful, though, because if your parents have late payments or that account isn’t in good standing for whatever reason, it could hurt your score.

Also not applying for a whole slew of new credit cards if you need good credit to get a home or car loan is advisable. Although not the biggest factor by any means, lots of inquiries for new credit can be alarming for some lenders. I try to only apply for cards when I really feel I need them, and as of right now I have no use for more cards; I’ve got three right now, one of which is a store credit card (I’ll talk about these in the future), and only use one for daily purchases.

Perhaps one of these days I’ll make a guide to understanding credit and how, from what I know, to best utilize your available credit.