Things to Ask Yourself Before Getting a Credit Card

Getting a credit card is many people’s first step into the world of personal finance. It is essential for building your credit so you can eventually take out debt to buy a house or be competitive for other housing opportunities such as luxury apartments or home rentals. At the same time, this tool is the reason for many people’s crushing debt that is ruining their lives. To help make sure you don’t turn this tool into a total nightmare, we’ve come up with three questions to help direct your excitement about getting a credit card:  

Will you use it and get value out of it?

Credit cards r may be specialized in the benefits provided. Some cards are specialized to provide more benefits for travel, others are more specialized for more common purposes such as groceries. When deciding what card to get or whether or not to get a specific card, make sure your current spending habits match the benefits the card provides! 

Will you incur interest?

If the answer to this question is yes, don’t get a credit card. Credit cards are a valuable tool to bring benefits to your current spending or allow flexibility with the timing of your payments. But the second you incur interest on a credit card, the costs of that interest will quickly outweigh any other benefits. For reference, the current average APR on a card is 17.3% (https://www.creditcards.com/credit-card-news/rate-report.php), which is 3 to 5 times more than most people pay on a mortgage. You can ensure you don’t incur interest by paying off the statement in full on a monthly basis by the due date. If this isn’t feasible with your spending habits or current financial situation, you should NOT get a credit card. 

Will it change your spending habits?

This last tip is a bit more contextual for most people. If you can afford the monthly payments and would never pay a cent of interest, you should still consider if getting a credit card would change your spending habits. Many people get a credit card so that they can take advantage of the cash back benefits they provide on purchases. In order to maximize these benefits, people will consciously use their credit card to spend on items over cash or debit to ensure they are making use of the rewards programs. However, it is often forgotten whether or not they should have made the purchase in the first place. Studies have shown that people may spend up to 100% more when paying with a credit card as opposed to cash. If you are the type of person to increase your wasteful spending when using a credit card, then the cost of wasteful spending can easily overwhelm people’s budgets, leaving them wondering why they suddenly have worse off despite paying off their credit card balance every month and paying no interest.