Why Do I Need a Credit Card?
Do I really need a credit card? You may be asking yourself that question, since you've heard all the horror stories about having a credit card, and the massive debt problems it can create. However, those debt problems are a result of irresponsible spending, not the fact that someone just has a credit card. It's important to know why you need a credit card, as it will impact many other financial decisions you might try to make in your life.
The main reason you need a credit card is not so you can buy whatever you want, but so you can establish good credit in your name. Having a credit card and paying it responsibly, goes a long way towards establishing your financial trustworthiness. Many future lenders will take a look at your credit report to see if you're a financial risk for them to loan money or services to. They base their decision on how much credit you have, and if you've made on time payments for the debts you currently owe. Many times, they will view your credit-to-debt ratio. If you've got a credit card open in your name, with nothing charged on it, you'll display a good ratio there.
There's several ways to begin establishing your credit history, even if you've never had a card in your life. Some local business or department stores may be more willing to provide a credit card to someone with no credit history. Also, you can apply for what's called a secured credit card. These cards require you to put up money on them before you are able to make charges. The final idea may be to have a co-signor who has good credit help you out by co-signing on a card application, just to get you in the door. These ways will help you start a positive credit history in your name.
Your credit history will play a major part in terms of securing a mortgage for a new home, possibly getting a future job (some employers check credit reports), getting utilities and leasing or purchasing a vehicle. The lenders in all of these situations want to know that they can trust you to pay them back. Otherwise, they have no real reason to extend any sort of loan to you, or if they do it will be with a high interest rate attached.
Next time you find yourself asking whether you really need a credit card or not, the answer is yes. But also ask yourself, can I have this credit card and be responsible with it? The answer to the second question will be the one that tells you how well you'll handle keeping your credit history in tact.
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