Credit Cards: Risky, Annoying, and Necessary

Recent analysis of credit bureaus has led to an interesting finding: Young adults are shying away from credit cards. Given the problems their parents had with credit during the recession, it is easy to understand why. The previous generation racked up an unprecedented amount of consumer debt, and many still struggle to pay it back. Fearing a similar fate, young adults now believe that credit cards are too risky of an endeavor, and are hesitant to take on the responsibility of paying back a balance. After all, since most purchases can be made with debit cards, credit cards often do not seem to be worth the stress and hassle. Unfortunately, avoiding credit cards can lead to more annoying problems in the not-so-distant future.

Credit cards help to build a consumer’s credit history. When you have a credit card account, credit bureaus (which keep records of your credit) will note how much debt you accrued, how often you paid the debt, and if you did so responsibly and timely. All of this information is helpful to other lenders who want to know if you are a trustworthy borrower. Thus, when you seek another loan, such as for a car, your lender will be able to judge whether or not to extend credit to you. If you have never had a credit card, however, then credit bureaus will have nothing to report. Your future lenders will have no way to judge your trustworthiness. This will make it much harder to purchase cars, mortgage homes, or even get an apartment!

It is important to build a credit history as soon as you are able to handle the responsibility. Even one credit card account is better than none. Research which credit providers offer the most competitive rates and flexibility, and read all the terms and conditions. Only use the card for purchases that you can afford to pay back, and try to pay off the balance whenever possible. Try to use the credit card at least once a month to keep the account active and build a payment history. Remember, having a credit card will only help your credit report if you are using it.

References:

Weston, L. (2013, June 24). Why young people hate credit cards. MSN Money. Retrieved from http://money.msn.com/credit-cards/why-young-people-hate-credit-cards.