Credit cards are extremely popular as a payment form. In fact, many people use plastic for almost all of their daily purchases! People who know how to manage their cards responsibly are the ideal target of credit card companies, and they can make use of helpful perks and even have the opportunity for great rewards. However, if you find credit cards detrimental to your finances, it’s likely time to retire it. If you’re one of these five people who should avoid credit cards, it’s time to put away the plastic.
The Bill Drowner
A person who doesn’t or lately pays their phone or Internet bills is inevitably going to have their service cut off, and may wait until it is before paying. While it may be tolerable if you can stand a brief service interruption and extra charge, you can’t do the same for credit card bills. People who should avoid credit cards frequently think they can apply this risky method to their debts, but most services have much larger fees, high penalty interest, and very bad effects on your credit report. When your credit isn’t optimal, it will be very difficult to qualify for a mortgage, loan, or rental. If you back yourself into that corner, you’ll realize you are one of the people who should avoid credit cards.
The Broke Kid
A person who lacks experience with credit cards and a person who is operating on a very tight budget (like a college student) is a nasty combination and definitely someone who should avoid credit cards. This broke student will likely overextend their card, willing to justify purchases he or she can’t afford. Jus through some seemingly harmless purchases every week, the student can end up frighteningly far into the red. These students and other young adults on a tight budget need to rein in their spending to a level that can be accommodated with the resources available to them. However, early credit card use is an attractive way to extend beyond what their savings can allow, and by the time they realize that they’ve depleted their savings and incurred crippling debt, they already have cemented a future of years of debt repayment. The CARD Act of 2009 tried to slow this by making it difficult for adults under 21 to qualify for a credit card without proving a means of paying the bills, and are probably people who should avoid credit cards anyway.
The Reward Crazy
Most responsible credit card users look straight to the balance due on their card when going over their monthly statement, but some holders are obsessed with the points, miles, or other rewards offered just for spending their money. Subconsciously making frivolous purchases in the name of “racking up rewards,” they dig themselves into debt that their rewards can’t even begin to fix. Attractive programs can’t make up for interest and program fees, so know you shouldn’t overspend—this desire may deem you a person who should avoid credit cards. A little cash back or discount simply isn’t worth it.
The Indecisive Enroller
Some credit card holders constantly rotate their charges between many credit cards in order to make a small monthly payment rather than a large one to totally clear the debt, but fall into the hole of ever-increasing interest that is difficult to pay off. Deluded into thinking that their small monthly payment is all that they need to keep up with, their irresponsibility compounds into bigger and bigger debt until the cost for everything they buy slowly inflates. The only way to fix this is to pay off your balances, and sticking to other forms of payment until their debt is resolved and their finances are once again under control.
The Contract Skimmer
One of the biggest pitfalls in owning a credit card is that it makes purchasing items much easier and deceptively easy. However, despite this they do take time and lots of learning to be fully understood and then used responsibly. Many cardholders jump the gun on getting a credit card, and dive right in before understanding interest application, cash advances, or avoiding fraud. Similar problems are seen in people driving cars before truly grasping how to drive responsibly, and these consumers are definitely people who should avoid credit cards since they have not yet learned how to responsibly use one and the effects it may have on the future of their finances.
Don’t forget that many credit cards work much better than others for people with certain borrowing patterns. A bad credit score will make you much less likely to qualify for a credit card with a prestigious rewards program, and a simple one may better suit your spending habits. For entry-level credit card holders, the ideal choice is a simple card that you can easily pay on time and every month. By building your credit score this way, you secure your future finances and learn responsibility with money. BE safe, and know when you may be someone who should avoid credit cards.