Are credit cards a necessary evil?

4 MIN READ | #blog

Having an additional payment option in your wallet has its advantages. Say you’re strapped for cash but your preteen needs a new bike, you can simply charge it to your card. It provides a cushion in case you face a short-term budget crunch.

Credit cards have been given a bad name due to their easy misuse. It is the very reason why credit cards are responsible for the large amount of debt the average American carries. Despite the backlash, credit cards may have some significant advantages.

Make your credit work for you

The bad rap on credit cards goes way back. From annual fees, to getting you into high-interest debt, we are wired to only think negatively about carrying “plastic” in our wallets. Now, there are card options that do not have annual fees, and some even offer zero percent that can actually help you pay down and manage your debt faster. How else can credit cards bring confidence to your financial world?

1. Building credit

Opening a credit line is one important step in building your credit score. A score of 740 or higher is considered very good in the eyes of creditors.1 Your creditworthiness may eventually qualify you for better interest rates on car loans, mortgages, and other financial tools. But be careful, and don’t rack up debt just to build your credit. Paying your balances in full each month and living within your means will be key to building and maintaining strong credit scores.

2. Security

Credit cards can offer protection from theft or fraud. If your debit card is stolen, your account can be locked. When that happens, auto drafts and bills may get bounced, and fees could be added to your personal or business bank account. Your credit score may take a beating in the process if bills, loans, etc. are not paid on time. Resolving the fraudulent transactions and having the money restored could take a significant amount of time while the bank investigates.

When a credit card is stolen, money is not being taken from your bank, and is only limited to how much your credit limit is. When you notify your credit card company of fraudulent charges, they will likely start an investigation immediately. If the amounts are low, they may remove them off your card right away. If the amounts are higher, they could put a temporary freeze on the card and open a bigger investigation. You can also set up alerts for transactions on your card, so if something fraudulent happens, both you and your credit card company are notified. Some credit card networks provide zero liability coverage for unauthorized usage. Several credit card companies are now also offering consumer protection by helping resolve refund issues when consumers are unable to resolve merchant disputes on their own.

3. Cashback

It has never been easier to earn money from your credit cards. The concept of cash back has grown into a financial opportunity over the years. Many credit cards come with some points or rewards, along with bonus points for certain areas of regular spending, like gas, online shopping, or restaurants. With every purchase, you accumulate points that may be redeemed against gift cards, merchandise items, or, in some cases, cash back.

Finding a card that aligns with your spending patterns does the trick. Shop for a card that will encourage your continued patronage by the retailers you enjoy by offering you lucrative discounts and rewards. Be sure to also check annual fees that some cards have. This is not necessarily a bad thing, since some cards may offer higher returns when you have an annual fee.

Don’t get stuck in the hamster wheel

1. Pay the balance off monthly as not to gain credit card debt.
2. Do not spend more than you can afford. If you must make a big-ticket purchase on your card, calculate the installments, and make sure you can pay back it back comfortably every month. Also, try to leverage 0% offers.
3. Start using a credit card for normal expenses like, gas, groceries, etc. Be sure to still budget here, and you can pay off your card weekly, bi-weekly, or monthly.
4. To get even better organized, use one card for fixed expenses and another for non-fixed expenses. This allows for stricter budgeting and for you to identify specifically where the inefficiencies are in your spending. 

It’s worth taking the time to do the research to find the right card with the greatest number of advantages for you and your lifestyle. Consider how a credit card can be part of your strategy to meet your financial plan objectives, and speak with a financial representative as your overall financial plan changes with time.

Brought to you by The Guardian Network © 2020, 2022. The Guardian Life Insurance Company of America®, New York, NY

2022-142427 Exp. 08/2024

Not seeing what you’re looking for?

The Guardian Network®

Living Confidently is powered by The Guardian Network.



Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.