Most of the financial gurus seem to be 100% against credit cards. However, there are a few times when taking advantage of those credit card offers you receive in the mail makes sense. Credit cards can be a useful way to rebuild your credit or to establish new credit. Many credit card companies include benefits that might have a positive impact on your current situation.
Not all of those unsolicited offers are worthy of an automatic trip to the garbage can.
You might want to take that new credit card if:
1. You don’t have any credit and need to establish a credit history. Perhaps you’re in college and would like to begin the process of establishing a positive credit history. You probably aren’t in the position to purchase a car or home with a loan. But you’re inundated with credit card offers every day.
- In this instance, getting a credit card is a great idea. Just be sure to use it responsibly and pay off your balance each month.
2. You require a card that’s more widely accepted. Some credit cards aren’t widely accepted, like American Express or some of the more obscure cards. It makes sense to have a MasterCard or Visa, as long as you’re getting a card with good terms. These are accepted anywhere credit cards are accepted.
3. Your credit score is in the dumps and you’d like to improve it. Credit cards are an effective way to raise your credit score. Your score will improve when you have more credit available to you. Remember that one portion of your credit score is the percentage of your total credit that’s currently being utilized.
Having more credit will lower this factor.
- Using a credit card responsibly will also improve your credit score.
If your credit is quite poor, a secured credit card is an option. Your available credit will be comparable to the security deposit you provide.
4. The interest rate on your current credit card is too high. There’s no good reason to pay more interest than necessary if you have other options available to you. Search around for the best rate without ignoring the other terms. Ideally, you’d never carry a balance, and the interest rate would be irrelevant. But everyone carries a balance from time to time.
5. The opportunity to transfer an existing balance is too good to pass up. It’s not uncommon to receive offers to transfer your existing balances at 0% interest for up to 18+ months. If you currently have a high balance at a high rate of interest, this can be a great move. A 0% balance transfer can be a huge financial coup.
- Read the fine print. A single late payment will result in all the accumulated interest from day one being added to your account. Remember that the interest is accumulating. Whether or not you get stuck paying that interest depends on your ability to comply with the agreement.
6. The rewards offered with the card are worth it. If you use a credit card regularly, it makes sense to find one with a rewards program that benefits you. Some cards offer points that can be redeemed for a variety of things. Some cards give gift cards, airline tickets, or even cash.
Getting a new credit card isn’t always a mistake. Ask yourself whether a new credit card will harm or improve your financial situation. Using a credit card irresponsibly can seriously damage your finances. Only acquire credit that makes sense for you. Not all credit cards are created evil.