The debate over whether the use of credit cards is good or bad is fierce, and seemingly never-ending. Many people feel that credit cards are the root of all evil, while others look at the benefits credit cards afford consumers. But the key to the debate is truly understanding what a credit card is, and is not.
A credit card is not free money, contrary to popular belief. You must pay the money back, and if you don’t, you will be assessed finance charges and possibly penalties. That said, a credit card isn’t an option to avoid getting a job. A credit card is not intended to be a means of overextending yourself either. If you don’t have the money, or you won’t be getting the money soon, don’t charge it. If you primarily have a commission-based salary, it would make sense to charge purchases to a credit card and pay them off when the money becomes available. But if you’re a college student spending money you don’t have, you’re heading for trouble.
Let’s talk about what a credit card is. A credit card is a payment method that allows consumers to buy goods or services on credit. Consumers can buy items without having the available cash on hand, and pay at a later date. A minimum balance is due every month on revolving accounts, or if the credit card is an installment account, the full balance is due at the end of each month.
Now that we have the basics down, let’s talk about what a credit card really is, and why we need them. Let’s face it; we are a credit driven nation. Almost every consumer in the United States has a credit card, and nearly every merchant in the United States now accepts credit cards as a form of payment. Credit cards are a convenient form of payment, and it’s almost impossible to get by without one these days.
In fact, if we want to qualify for larger loans such as auto loans or mortgages, we need to establish and build a solid credit history, often through the use of credit cards. So it’s not so much a matter of choice, but a matter of necessity. Many opponents of credit card use say you can and should live without credit cards, but they fail to realize that banks and lenders won’t give you a loan without credit history. And how many people can actually buy a home outright, without a mortgage?
Along with the much needed credit history credit cards provide, they also offer convenience, flexibility, and security. How many people want to go to the bank several times a week to withdraw cash? And how many people want to fumble through their wallet to make payments at every merchant they visit?
Credit cards offer a form of flexibility. If you don’t get paid regularly you may have trouble paying for items at the time of purchase. With a credit card you can make the purchase now, and pay later. Or during tough times, you can make the essential purchases you need today, and pay once you get back on your feet, of course with a portion going to the credit card issuer.
Another very important and often overlooked positive aspect of credit cards is the security feature. It’s not smart to carry around large quantities of cash for any reason. With a credit card, you can leave your cash in the safe hands of your bank. Along those same lines, using your credit card for purchases is safer than using cash because you’re purchase is documented, and most credit card issuers will allow you to dispute any purchases with the merchant if any problems arise. If you pay cash, you’re on your own. And there’s often no transaction history associated.
Of course with exorbitant credit card fees, penalties, and the possibility of overextending one’s self, the debate will rattle on. And thankfully credit card issuers are beginning to clean up their act and make the terms and condition more clear, and penalties more reasonable. But the question of credit card use shouldn’t be so much about whether they’re good or bad, but if we as human beings are responsible enough to use them.
