Credit Cards: Reasons to Eliminate, Reasons to Keep

Credit cards have a somewhat tarnished reputation and, in some ways, for good reason. At the same time, used responsibly, they can be a valuable financial asset. Here are 3 reasons to consider eliminating your credit cards and 4 reasons to keep your plastic.

Reasons to Eliminate Credit Cards

Higher spending. Having a credit card may make it easier for you to spend thoughtlessly on goods you don't really need.

Slippery slope to debt. When using a credit card, it is easy to lose track of what you are spending and, as a result, to accumulate a larger balance than you intended. Then, when faced with a larger-than-expected credit card bill, the temptation can be strong not to make the financial sacrifice necessary to pay it in full. Once you start carrying a credit card balance, interest can quickly build up, making it even harder to pay off the balance and taking you further down the path of rising credit card debt and endless payments.

Negative effect on credit score. Carrying a high credit card balance relative to your credit line can negatively affect your credit score, as can late or missed payments.

Reasons to Keep Your Credit Cards

Transaction facilitator. Having a credit card makes some transactions, like renting a car or reserving a hotel room, quicker and easier.

Financial security blanket. A credit card can be invaluable in some financial emergencies when you don't have or can't quickly obtain cash.

Credit score booster. If used judiciously, a credit card can help to boost your credit rating. Since available, untapped credit is one factor used to calculate your credit rating, if you limit charges to a small percentage of your credit line and pay your credit card bill in full and on time each month, having a credit card can result in a higher credit score.

Rewards. Some credit cards offer surprisingly generous rewards. As long as you use your card for purchases that you would make anyway, these rewards can be a nice financial bonus.

What to Do

If you are disciplined when using a credit card and always pay your credit bill in full, there is no reason not to have one. On the other hand, if having a credit card is likely to draw you into debt, using cash or a debit card would be the wiser financial choice for you.

Two cautions, if you choose to stop using your credit card. First, think about keeping your credit card account open even though you don't plan to use the card, because, as described previously, having untapped credit is good for your credit score. Second, if you don't already have one, you will need to build an emergency fund so that you will have cash on hand for inevitable, unexpected financial demands, for example, for big car repair bills or a large health care bill.

More from this Contributor:

http://finance.yahoo.com/news/First-Person-What-Know-About-ac-917628186.html?x=0 , What to Know about Secured Credit Cards

http://www.associatedcontent.com/article/7766862/retirement_planning_for_young_adults.html?cat=3 , Retirement Planning for Young Adults