First Person: The Pros and Cons of Credit Cards for Young Adults

Young adults get so much advice on whether to get a credit card or not. This decision is one that should not be entered into lightly. There are some benefits to having credit cards, but they must be used wisely and not allowed to get out of control. There are also some benefits to avoiding credit cards. If you are faced with this decision, here is some information you should consider.

Pros

There are several benefits of having a credit card. A credit card that is used wisely can help you build a healthy credit score. Don't max the card out - your debt-to-credit ratio is a huge part of your credit score - but keep a small balance and make your payments on time every time.

If you choose a credit card with rewards and a 0% introductory interest rate, you can come out ahead if you use the card wisely. Some credit card users use their cards to charge items, and pay them off within a day or two of the charge. This helps them rack up points or cash back. They can then use the cash back for fun expenses, or exchange the points for items. Just don't go crazy, and pay off your balance every month.

A credit card is also good to have in an emergency, but be wise about what constitutes an emergency. A new stereo or dress for the club is not an emergency. A broken tooth or blown car engine is an emergency. If you get a credit card to have in case of emergency, only use it when there is no other option.

Cons

The biggest drawback of having a credit card is the potential for abuse. It is way too easy to make a small charge here and there and promise yourself that you'll pay it off. Then other bills and expenses get in the way, and before you know it, you have several thousands of dollars in credit card debt that you can't pay back. For this reason, it is usually best not to have a credit card. In case of emergency, have an emergency savings account with a minimum of $1,000 on hand to cover unexpected expenses. Most financial advisors suggest that you save three to six months of living expenses in your emergency fund to make sure you can pay bills in any situation, and help you avoid the lure of credit cards.

As always, if you have any questions about this topic or any other finance-related issue, seek the services of a licensed professional financial advisor.

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