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Do you really need a credit card or can you spend your life paying for everything in cash? Functioning financially without a credit card is possible, but it's a good idea to have one in your wallet.

Credit cards can give you emergency funds, help finance large purchases and protect you against fraud. Also, using a card responsibly is great for building credit.

The advantages of having a credit card

Having a credit card means getting access to a revolving line of credit with the issuing bank. The account comes with a predetermined credit limit based on the issuer’s assessment of the customer’s creditworthiness. As long as your outstanding balance stays within that limit, you can continue to accrue fees.

Having that additional payment option in your pocket has advantages. For one thing, you’ll have a safety net in case you face a short-term economic crisis. If you don’t have cash and, for example, your car needs a new set of brakes, you can simply load it onto your card.

A card can be very useful if used well Photo: Kindel Media

Even if you have funds in your savings account, using a card can be a great way to earn rewards. 

Some cards award airline miles based on how you spend. In recent years, the number of rewards programs has exploded, with banks offering discounts on everything from hotel stays to special products.

Yet another reason to open your first card is to start building your credit history. Without a history, it will be difficult to obtain a loan for a car or home.

Credit cards report your payment history to the credit bureaus each month. If you consistently meet your due dates, it can do wonders for your credit score. You’ll do even better if you keep using credit (the size of your balance relative to your credit limit). A utilization rate of less than 30% for each account is considered ideal.

The length of your credit history has a direct relationship to your credit score. The longer you keep an account, the better it is for your score.


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