Should you take out a credit card?

a credit card refers to a plastic or metal card issued by a financial services company, which gives you the possibility to temporarily borrow the funds to pay for a product or service. By using the card, you agree to some conditions that are related to payment dates, interest, and fees.

Although you may have heard about different conflicting opinions related to getting a credit card, it is more than likely that will need to use a credit card at some point in the future. Therefore, here is what you should consider before taking out a credit card.
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Credit Cards vs. Debit Cards

At first sight, a credit card and a debit card appear almost identical. Both of them are simi

lar in having an expiration date and a 16-digit number.

A debit card comes with a personal identification number that is composed of four-digit, and as soon as enter your PIN during a purchase, the card immediately draws funds from your checking account. Conversely, a credit card gives you access to a line of credit issued by a financial institution, where you can access up to a certain credit limit and use the funds to make purchases or cash advances.

While a debit card won’t affect your credit at all, credit cards are also used to build your credit score. Besides, you can earn points, travel miles, and cash rewards for making purchases using a credit card.

The Benefits of Using a Credit Card

Although credit cards sometimes get a bad rap, you can benefit from many advantages of regularly using credit cards. The following are some benefits:

Building credit: using a credit card responsibly and regularly can help you build a good credit score over time. Try to make charges and pay them off in full every month by the due date to demonstrate that you are using your credit card responsibly and that you are dedicated to making payments on time.
Fraud protection: Credit cards offer better fraud protection than debit cards. For example, providers like MasterCard offer zero-liability coverage for unauthorized usage.
Earning cash and other rewards: using a rewards credit card is a great way to earn cash and rewards for any purchases you make. In case you spend a certain amount of money after opening the card, you can often qualify for a one-time cash bonus. Besides, you have the possibility to earn cash-back rewards or frequent flyer miles just for spending money on your credit card every month.

Should You Get a Credit Card?

While having credit cards will make you enjoy many benefits, they do often come with very high-interest rates as well. Therefore, taking out a credit card will not be the right choice for everyone. However, getting a credit card could be a good deal in the following situations:

Establishing credit: using a credit card responsibly and regularly can help you establish your credit. Actually, having a positive credit history can make things easier for you to gain approval for loans and other lines of credit with attractive rates.
Receiving points and other incentives: when you earn credit card rewards, you receive free money or other incentives for any purchase you make. For instance, if you regularly make business travels, you should consider taking out a credit card so that you earn travel rewards.
Price protection: If you bought a product using your credit card and later you see the same product advertised at a lower price, you may eligible for price protection. That means, you can ask for a refund for the difference in pricing.
Protections for large purchases: usually, most of credit cards provide purchase protection against theft or damage. This feature could be very useful and helpful in case you are planning to make big purchases and want to safeguard your money.

What to Consider Before Opening a Credit Card

Before you apply for a credit card, make sure that it is the right choice to have one according to your situation. For example, if you have a history of racking up credit card debt, it may not be a good idea to get a credit card.

After all, using your credit card wisely and making monthly payments in and on time will only help you to build a significant credit score. Thus, consider taking out a credit card only if you are sure to use it responsibly in order to have a stable financial future.

Moreover, consider what kind of rates you qualify for and what types of fees you will have to pay, including annual fees, late fees, and foreign transaction fees. Legally, credit card companies have to reveal these charges so for people to enquire about these fees in order to be sure of getting the best card according to their financial situation.

How to Build Credit without the need of using a Credit Card

As we mentioned before, using a credit card responsibly is a great way to build your credit score, however, it is not the only option for this purpose. Therefore, here are some ways you can consider to build a considerable credit score.
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Become an Authorized User

Becoming an authorized user on someone else’s card means that you will have access to another person’s line of credit, which will allow you to receive credit for any payments made on the account. However, in case the main credit holder stops making their payments, it could negatively affect your credit score.

Apply for a Credit-Builder Loan

This option is a great way to build credit without the need of spending much money, as when you take out a credit-builder loan, the lender will place the amount of the full loan into a separate and different account. You will then make payments every month until you reach the full balance of the loan. As soon as the loan is fully paid, you will receive the money back.

• Apply for an installment Loan

Student, personal, or auto loans are examples of Installment loan, which can also help you build credit on condition that the lender reports your payment history to the credit reporting agencies.

• Ask for Rental history to be reported

While the home or apartment rental history is not usually reported to credit bureaus, Experian, which is one of the three major credit bureaus, allows it. Thus, in case you have always paid your rent on time, consider asking your property owner to report it to Experian, so it can help you build and increase your credit score.