Do We Really Need Credit Cards? - Finance - Credit

DO WE REALLY NEED CREDIT CARDS?

Do we really need credit cards? Surfing the internet and interviewing my friends and family for an answer to this question, I came across a multitude of replies which generally moved towards the direction of a resounding NO. The only ones who were advocating the necessity of credit cards seemed to be credit card companies and banks. Ive taken an objective stand and drawn from my personal experience to provide you with a non-biased and an informative answer. In 2007, about 73% of American families had credit cards. Out of every 10 families with credit cards, 8 had credit card debts. Thats almost a whopping 180 million people in credit card debt. Please refer to for further information on the statistics.

It is no wonder that there was such a resounding negative answer to the necessity of credit cards. Scores of people all over the world are swearing to cut up their credit cards once they clear their credit card debts and advising anyone they see to never fall into the trap of signing up for a credit card. They even go far enough to proclaim that credit cards are evil and a vice. However, the nagging question is if credit cards were really all that unnecessary and evil, why do so many millions of people sign up for them in the first place? According to my understanding, it is mainly due to some serious misconceptions. Let us look at them first.

The most common misconception is that a credit card is required to build a good credit history. This is one of the common reasons given when encouraging people as young as 18 to sign up for credit cards in college. However, all you need to do to build a good credit history is to pay all your bills promptly. This can be utility bills or your rent. It need not be a credit card bill. People also believe that you need credit cards in case of emergencies. Honestly, no financial advisor will ask you to sign up for a credit card in case of emergencies. Responsible financial planning techniques involve saving six to eight months of expenses for emergencies, not owning a credit card.

While it is true that you cant be carrying around large amount of cash and you may find yourself needing a Visa or MasterCard when bank cards are not accepted, the solution need not be a credit card. It can be a debit card. Debit cards come as Visa or MasterCard and therefore, can be used wherever credit cards are accepted. You can also use these debit cards for phone or online transactions. They are as universally accepted as credit cards and can be as convenient. Although I have just debunked some common reasons provided for getting a credit card, I would like to add some good of credit card by drawing from my personal experience over a period of about 9 years now.

I started work as a teacher right after university. I found myself suddenly swamped with the need to purchase suitable formal clothes, shoes and bags for classroom teaching and sportswear for physical education and extracurricular activities. I did not have the money in my savings to buy what I needed. I signed up for a low interest credit card with no annual fees. I purchased what I needed and paid up for them over the next three months. Besides getting a loan from someone, credit card was a good solution for me at a time that I was starting to build myself financially. It helped me stretch my dollars the 3 months. A few years later, I decided to quit my job and do my Masters degree. During this period, I decided to work as a private educator and opened up my own business. Although I had saved up substantially by that time, I did not want to use it in case I did not make much money in my business. As my cash inflow was not fixed, I used my credit card to invest in items s uch as tables, chairs and teaching materials. Once again, having the credit in hand helped me stay confident as independent. Once again, I paid it off in a matter of 5 months.

Despite owning the card for a couple of years by then, I did not start to despise it like the majority of credit card holders. I did not get myself into debts and cut up my card. On the contrary, I was quite thankful for such a handy financial tool in times of need. Recently after my wedding, I got my husband and myself a new credit card one with a low interest rate, low annual fees and a really good rewards program. We charge all our bills to that card, including utilities, grocery and shopping. Although we are sent monthly statements, my husband and I keep track of our expenses charged to the card on a weekly basis. This ensures that we never go above our monthly budget and will never end up spending beyond our means.

Once again, instead of finding ourselves cursing our credit card for financial difficulties, we are loving it for making so many things simpler for us. It is so easy to track every bill in one statement. It also makes our monthly bookkeeping process a breeze. Furthermore, we also get discounts at many outlets and petrol stations for using our credit card. To top it all, we get rewards points that we exchange for spa treatments and movie tickets. In response to the people who hate credit cards, Id say it really isnt the fault of a knife if it is used to hurt someone. The problem has never been the credit cards but the misuse of credit cards by people. If you had been lured into getting a credit card by the misconceptions, then switch your financial strategy to one that suits your money management style. If you had gotten yourself a bad deal with high interest rates and costs, learn what to look out for when searching for good credit card deals, do an extensive research and read the fine print conscientiously.

So, do you really need credit cards? To people who may not be able to control their misuse of the buying power offered by credit cards, my answer is no. If you have a tendency to buy impulsively and overspend, stick to debit cards and cash. Be honest with yourself when identifying your money managing style. As for those who exercise excellent money management as well as self control, the answer is still a no. You do not really need credit cards. However, it is definitely a good financial tool that can benefit in many ways other than just financially.