Credit card with chip
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Credit cards can be valuable tools if used wisely and responsibly, but they can also lead to financial stress and debt. Should you get a credit card? The answer to this question depends on your goals and appetite for risk. Before you decide, consider how a credit card might benefit you and which pitfalls you’ll need to avoid.

How can a credit card benefit you?

Credit cards come with a slew of benefits you can’t get with other financial products. While the perks of using credit can vary, they may include:

  • Credit cards help build credit – Since credit cards report your payments and usage to the three credit reporting agencies – Experian, Equifax, and TransUnion – using one wisely can help you build credit over time. Pay your bills on time and keep your credit utilization low and you may even see your credit score rise.
  • Earn cash-back or travel rewards – Many credit cards offer cash-back or travel rewards for every dollar you spend. Pay your balance in full each month to avoid interest and these rewards may truly be “free.”
  • Gain valuable consumer protections – Some credit cards offer valuable consumer protections such as extended warranties, zero fraud liability, price protection, and guaranteed returns.
  • Benefit from ease of use and convenience –When you use credit, you don’t have to carry around a wad of cash or worry you’ll run out of money before the day’s end.
  • Manage your money online – Most card issuers offer easy-to-use online portals that let you track your purchases and card spending online. You will also be able to see and pay your bill online, making money management easier.

What to watch out for

While there are plenty of perks related to the use of credit cards, there are pitfalls to watch out for as well. The biggest disadvantages to credit cards include:

  • Interest rates may be higher than other financial products – As of April 2018, credit cards come with an average interest rate of 16.83 percent. This may be higher than the rate you’d pay on personal loans, home equity loans, and other financial products.
  • You may face late fees and other fees – Credit cards can charge late fees and over-the-limit fees. Some cards even come with annual fees.
  • Credit card usage can easily lead to debt – The average household with debt carried over $16,000 in credit card debt last year. While having the option to “buy now and pay later” may be convenient, credit cards can make spending too easy.

Signs you should get a credit card

Before you decide whether to sign up for a credit card, it can help to consider your goals and why you need credit in the first place. Some signs you’re ready for a card of your own include:

  • You are debt-free and have a plan to stay that way. Spend only what you afford to repay and use credit in conjunction with a monthly budget or spending plan.
  • You need to build credit. Using your card regularly and paying your bill early or on time will likely boost your credit score.
  • You want rewards. Pick up a solid rewards card to earn cash-back or travel rewards, but make sure to pay your balance in full each month if you truly want to benefit.
  • You actually need a short-term loan. While it’s ideal to avoid debt, there are times when you need a loan. Credit cards can work as a short-term loan, and some even offer 0% APR on purchases for 12 months or longer.