Are Credit Cards Bad to Have and Use?

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Many of us have heard people talk about the dangers of credit cards, saying cards are too risky and they’d never use one.

Personally, I’ve found a ton of benefits in using credit cards. They’ve helped me build my above-800 credit score, qualify for loans, and earn rewards like cashback and free flights. 

Credit cards themselves aren’t bad — but misusing them can be. 

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Are Credit Cards Bad?

Here’s the thing: Credit cards are not inherently bad. The problem is the potential for credit card debt. 

If you use your credit card like a loan you don’t pay back every month, you’ll owe a lot more than you originally spent. 

But if you treat your credit card more like a checking or debit account, meaning you never spend more than what’s in the account, you can enjoy benefits like cashback rewards and travel protections. 

Why Use Credit Cards?

There are both good and bad things about credit cards. Let’s get into the good stuff first. 

Build your credit score

It’s nearly impossible to get by financially without a good credit score. 

Using credit cards responsibly demonstrates your ability to manage debt, which builds and improves your credit. 

Paying your full balance before the due date will gradually strengthen your credit, making it easier to qualify for loans and reasonable interest rates (which also saves you money). 

READ MORE: How to Check Your Credit Score for Free

Earn valuable rewards

Paying in cash all the time means missing out on hundreds or thousands of dollars a year in potential rewards. 

Credit card companies offer rewards like cashback, in which you get a percentage of your spending back in your pocket. There are also many cards that offer travel rewards, which enable you to score free hotel stays and flights. 

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Protection and insurance 

When you use a credit card, you’re typically protected from fraudulent purchases — which can save you a lot of money if someone snatched or skimmed your card. 

Some banks hold you responsible for paying fraudulent debit charges or require you to pay more than credit card issuers do. 

Features like purchase protection and extended warranties on purchased products come standard with some cards. 

Your credit card may also provide travel benefits like baggage delay insurance, reimbursement for trip delays or cancellations, and roadside assistance. 

Read your card’s information carefully to understand what it provides. 

Debit isn’t always an option

There are times when your good old debit card simply won’t cut it. I know some people insist on using cash or debit, but you might be required to use credit for things like a hotel room check-in. 

Plus, even if hotels accept debit cards as payment, that means the full balance is withdrawn immediately. When you use a credit card, the charge is listed as “pending” until you’ve checked out. This allows you to verify and dispute any charges beforehand. 

The Downside of Credit Cards

Obviously, I’m a fan of credit cards — but with a few important caveats. You should understand the risks before putting all your purchases on a card. 

First, there’s the risk of debt. If you’re going to spend more than you can afford to repay at the end of each billing cycle, then credit cards aren’t a good idea. 

Not only will you rack up debt, but high interest rates will cause any remaining balance to balloon quickly, and it becomes harder and harder to dig yourself out. 

And although using credit cards can help you build a favorable credit score, improper credit card usage does the opposite. 

Again, this goes back to how you handle the card: following a budget and paying the balance off each month helps your credit, but spending wildly or chasing credit card rewards does not. 

READ MORE: How to Pay Off Credit Card Debt

FAQs

How risky is a credit card?

The risk of using credit cards depends on how you handle money. As long as you can treat a credit card like cash (paying it off in full each month), it can be a useful tool for many reasons. 

But if you’re tempted to overspend or accumulate debt by not paying off the balance monthly, credit cards are very risky. 

Is it a good idea to not have a credit card? 

It could actually be a bad idea not to have a credit card. Cards are a way to build your credit, which opens up a lot of doors financially. 

However, the risk of spiraling into debt may be much worse than the inconvenience of not using credit cards. 

One way around that risk is to open a secured credit card. This works much like a debit card because you put down a security deposit, which usually equals your credit limit. You can’t overspend, and your credit score reaps the benefits of managing your card well.

Are store credit cards bad?

One type of credit card is usually more of a risk than others: store credit cards. You know, the ones where you’re paying for your purchase at some retailer and they ask you if you’d like to save 20% by opening a store card. 

Store credit cards aren’t usually worth the trouble. They may have higher-than-normal interest rates, and your use is limited to that store only. 

Yes, they may give you discounts, but keeping track of store cards can be a hassle and you might even find yourself overspending more with this type than with a general rewards card. 

TL;DR: What Are the Good and Bad Things About Credit Cards?

Credit cards aren’t evil. Whether they’re good or bad depends on the person using them. If you make regular purchases on credit cards and pay them off each month, you can earn valuable rewards and build your credit. 

But if you charge purchases you wouldn’t otherwise make and go into debt, credit cards can do a lot of harm. It all comes down to consciously using credit cards to your advantage. 

For more tips on managing your credit and budget, check out these episodes of the Erika Taught Me podcast:

• 10 Steps Towards Financial Wholeness
• How To Budget for Beginners
• The Psychology of Money

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Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.