We live in a world with credit cards. There’s no getting around it. People are talking about their points and miles and collecting rewards like it’s the latest version of Pokemon Go. And while credit cards can come with major benefits, it can also be a sticky financial trap if you’re not careful! So let’s answer the question- are credit cards for you? Are you a credit card person?

Who is NOT a Credit Card Person?

Let’s start with who is NOT a credit card person. If you are NOT a credit card person, this means that you think credit cards are free money. Spoiler alert- it isn’t! Not only do you have to pay back all the money that you spent, but if you don’t pay it back on time in full at the end of the billing cycle, this means you are not only lowering your credit score (more on that later) but you’re also paying interest and potentially late fees, which means extra money on top of the money you owe. It’s like a fee the credit card company charges you for letting you borrow from them. So that cute sweater you bought for $50? By the time you’re done paying it off, you could’ve paid upwards of $75 or more!

This interest can trap you and keeps compounding every month until your payments balloon and become a true drain on your financial situation. You don’t want to dig yourself so deep into a hole that you don’t know how to get yourself out of. 

Who IS a Credit Card Person?

A credit card person is someone who is responsible with their spending. They use a budget, and although when using a credit card, the money isn’t pulled out of their account until later, they know that they are responsible for the payment. They don’t want to fall into the interest trap so they pay off the card fully, which since they’ve budgeted their spending, they already know it is something they can afford to do. They then can use the points and miles guilt free because they know that it is an extra bonus of credit card usage- not the whole point of it. 

What’s the deal with Credit Score?

If you ARE a credit card person and are using them responsibly, this will be reflected in a high credit score. On the flip side, if you keep missing payments, you will feel the hit of a lower credit score. But what’s a credit score and why does it even matter? It’s kind of like a report card that the credit card company, and other banks and creditors, have on you to see what level of risk you are as a lender. The lower the risk (the higher the credit score), the more benefits you get such as a higher credit limit, lower interest rate, and even better opportunities when it comes to finding a rental apartment or sometimes even employment! The higher the risk (the lower the credit score) the more the banks will charge you if you’re looking to borrow money. That means you could be paying thousands of dollars more in mortgage costs, auto loans, and could even be rejected from certain apartment complexes. 

So, What Should You Do?

Well, if you already are a credit card person- amazing! Keep doing what you’re doing, because you’re doing great! If you find yourself struggling to set limits on your spending when you use a credit card, or feel overwhelmed and stressed with the monthly payments, it’s ok to NOT use it! Forget the miles and points- you’re stepping over hundred dollar bills to pick up pennies! Get a plan going for how to pay off the debt and in the meantime, switch to a debit card. When the money is taken directly out of your account, the impulse purchases hit a bit different. And make a budget so you always make sure you’re not spending more than what you make. 

Bottom Line: Credit Cards Can Be a Blessing or a Curse

Credit cards are a double edged sword. They can either work for you or against you depending on how you use them. The key is knowing yourself and being able to set those limits to start those healthy financial habits. Make a budget and spend within your means. It’s ok to take a step back if you feel like your spending is getting out of control. So take a good look at your financial health and decide for yourself if you are a credit card person or not!

Want more tips on managing money without the stress? Check out the Ultimate Money Guide to get your financial life in order—without the fear of credit card debt!