Why Everyone should Own at Least One Credit Card
I don’t own credit cards” is a statement we’ve all heard uttered with pride, but it really isn’t a very smart move on the part of the speakers.
For one thing, at some time in life everyone could be in a position to need credit. Few people can pay cash for a house, or even a car, and in today’s world, a high FICO score is necessary to get funding for those items.
Consumers who have always paid cash for everything do have a reason to feel proud of themselves, but lenders look at them as high risk, simply because they have no track record that shows how they pay their bills.
In the past, mortgage brokers were able to use items such as utility accounts and rental history, but that practice could disappear. Mortgage lenders are tightening up restrictions, and while the attitude once was “let’s make this work” the new attitude is much the opposite. They don’t want to lend to anyone who doesn’t look like a rock solid, low-risk borrower. They want to see high FICO scores.
Owning a credit card and using it responsibly – never exceeding 10% of your available credit and always paying on time – helps raise your FICO scores considerably.
The second reason is, of course, convenience and a “fall back” in case of emergencies. Even though you don’t use it regularly, a credit card can be a comfort if, for instance, your furnace blows up on a Friday night.
It’s also a handy tool to use to reserve a hotel room or a rental car, not to mention the most inexpensive means of paying for goods in a foreign country. When you pay with a credit card you get the most favorable exchange rate – which is far more favorable to you than exchanging your traveler’s checks at a currency exchange desk.
Credit cards are also considered a good form of identification when you want to write a check and the business insists upon 2 forms of ID.
If you choose a rewards card and use it wisely, you can also put cash in your pocket. By paying your balance in full each month, you pay no interest charges – yet your rewards dollars still grow. For some consumers, the year-end rewards can become a several hundred dollar “gift” at year’s end.
Lastly, by owning a credit card you are able to make purchases on line – often at a considerable savings. A variety of merchants offer the same goods on line and in their stores – but at a savings of up to 33% on line. The assumption is that they’re saving on the cost of a storefront and passing it on to their customers.
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