Do you need a credit card?

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Credit cards may not be a necessity for everyone, but they can make your life much easier and even help you save money.

Paying with a credit card comes with perks you may not get using other payment methods: rewards, security, convenience, and more. But credit cards also carry the risk of high-interest debt if you spend beyond your means.

Do you need a credit card?

While you may not need a credit card for most purchases, there are advantages to having access to credit. Here are a few reasons to open a credit card:

• Build credit. Paying your credit card bills on time and keeping a low credit utilization ratio (among other good credit habits) can help you build a good credit score. Great credit can help you qualify for loans (mortgages, auto loans, personal loans) and qualify for lower interest rates in the future. Credit card companies report your card use to the credit bureaus; as your positive payment history and other good habits show up on your credit report, you’ll increase your score over time.

• Emergencies. Even if you have a solid emergency fund, having access to a line of credit can be helpful when facing an unexpected expense. If you do use your credit card during an emergency, just remember to pay yourself back before your statement is due to avoid interest charges.

• Earn rewards or get benefits. Cash back or points and miles rewards can offer significant value on your everyday spending. Look for cards with rewards that align with your most common purchases; travel, groceries, gas stations, and restaurants are common reward categories. Then, you can put your earnings toward future purchases or your statement balance.

• Convenient payment method. Credit cards are often more convenient than cash, especially if you often need to visit an ATM. Remember to track how much you charge so you don’t spend more than you can afford.

• Take advantage of a 0% APR. Some credit cards offer introductory 0% APRs on new purchases or balance transfers. Today, these intro periods often last between 12 and 21 months. You can use a 0% APR on new purchases if you're planning a big splurge item and want extra time to pay for it without interest. Or, use a 0% APR on balance transfers to get a head start on any existing debt you already have. Remember, any remaining balance after the intro period will accrue interest at your card’s regular APR.

• Get added protection for your spending. Credit cards offer added security thanks to fraud prevention and zero liability protections from your credit card issuer. Review your statements regularly so you can dispute fraudulent charges before you pay your credit card balance.

Read more about protecting your purchases from payment fraud and online shopping scams.

Why you may not need a credit card

Though they have big benefits, credit cards may not be for everyone; they carry significant risks too.

Credit cards have high interest rates, which can lead to expensive balances. If you spend an amount you cannot pay off by the time your bill is due, you’ll quickly accrue interest on that balance. Even if you can’t pay the full balance, try to always make at least your minimum payment on time every month to avoid additional fees and penalties.

While credit cards can be great for building credit, your credit card use can also hurt your credit score. If you make late payments, miss payments, max out your card, consistently spend close to your credit limit, or apply for too many cards in a short time, you may see a drop in your credit. Luckily, credit scores change — so you can always get back on track with good credit habits.

Read more: How to use a credit card responsibly

Credit card pros and cons

Compare these pros and cons to help decide whether you need a credit card to meet your goals:

Pros of having a credit card

• Rewards and benefits: Rewards credit cards may earn cash back, points, or miles rewards in various categories. Some also have added benefits like annual credits toward travel or partner brands, discounts on certain purchases, and high-value welcome bonuses.

• Building credit: Unlike other forms of payment, you can use a credit card to establish credit and improve your credit score. Making payments on time, spending well below your credit limit, and other good credit habits can help you increase your credit score over time.

• Fraud protection: Today, most credit cards protect you against fraud, with zero liability for unauthorized charges. Other protections may include extended warranties and purchase protection, travel insurance, fraud monitoring, and more.

Cons of having a credit card

• Potential debt risks: Falling behind on your credit card payments can grow very expensive very quickly. When you don’t pay off your entire statement balance by your monthly due date, you’ll start to accrue interest at your card’s variable APR (annual percentage rate). Today, credit card APRs average well above 20%. Interest rates that high will lead to costly debt balances.

• Costs and fees: Credit cards also have other costs to consider beyond interest charges. Some cards (especially premium cards with the highest rewards value) charge annual fees, which you’ll need to pay each account anniversary to keep your card open. Other potential charges include balance transfer fees, late fees, foreign transaction fees, and more. Many credit card fees are avoidable, depending on how you use your card.

• Overspending: A credit card may not be the best choice if you are worried about exceeding your budget. The best way to use a credit card is like a debit card; only charge purchases you know you’ll be able to pay in full when your balance is due. But if you’ve gone into debt in the past or you are worried that access to a large credit limit may tempt you to overspend, another payment option may help you avoid taking on credit card debt.

Best starter credit cards

These are some of the best credit cards today if you want to improve your credit or open your first credit card with no credit history. Issuers report your credit card account information to the three credit bureaus (Equifax, Experian, and TransUnion) regularly, which helps you build credit.

Tip: Many credit card issuers allow you to check for preapproval before you apply. When you apply for a credit card, you’ll undergo a hard credit check, which can have a temporary negative impact on your credit. Preapproval allows you to check whether you’re likely to qualify for the card without any effect on your credit.

Capital One Quicksilver Secured Cash Rewards Credit Card

Why we like it: With a Capital One Quicksilver Secured card, you can earn rewards (1.5% back on every purchase) while you build credit. You must pay at least a $200 security deposit to open the card, which acts as your credit limit. You may deposit more up to your assigned maximum limit. As you build credit, you can qualify to upgrade to an unsecured Capital One Quicksilver Cash Rewards Credit Card and get your security deposit back. Plus, Capital One will automatically review your account after six months to determine whether you’re eligible for a higher credit limit, with no extra deposit required.

Capital One Platinum Credit Card

Why we like it: The Platinum Mastercard from Capital One is not a secured credit card, so you won’t need to submit a security deposit after opening. Over time, you can use it to build credit by paying your credit card bill on time each month — set up autopay to ensure you never miss a payment. After six months, Capital One will automatically consider your account for a credit line increase, which can also help you build credit by making it easier to keep your credit utilization rate low. The Capital One Platinum has no rewards and charges no annual fee.

Capital One also offers a secured version of this card: Read our full review of the Capital One Platinum Secured Credit Card.

OpenSky® Secured Visa® Credit Card

Why we like it: When you open an OpenSky Secured Visa card, you must submit a refundable deposit of at least $200 and potentially up to $3,000 (with approval), which acts as your credit limit. If necessary, you can also make partial payments over 60 days to fund your security deposit. After six consecutive on-time payments, you may be eligible for an increased credit limit (without an extra deposit) or an upgrade to an unsecured credit card. OpenSky does offer some cash-back rewards when you enroll in offers from select partner retailers, but no ongoing regular rewards rate. It also carries a $35 annual fee.

Read our full review of the OpenSky Secured Visa Credit Card.

Chase Freedom Rise℠ Credit Card

• Annual fee: $0

• Welcome offer: Earn a $25 statement credit when you enroll in automatic payments within the first three months

• Rewards:

  • 1.5% cash back on all purchases

Why we like it: Chase Freedom Rise has a lot of benefits for first-time cardholders that can help you establish credit and save money (including the 1.5% cash back on every purchase). If you already have a Chase bank account, you can increase your approval odds by keeping at least a $250 balance in your Chase checking account or savings account. Once you open the Chase Freedom Rise, you’ll benefit from practicing good credit habits. For one, sign up for autopay within the first three months to get a $25 credit. You can also qualify for an upgrade to the Chase Freedom Unlimited® card. If you have an open Freedom Rise account, you've made a purchase within the past 12 months, made on-time payments for 12 months, and have no suspended Chase accounts — Chase will automatically evaluate your account to determine if you’re eligible to upgrade.

Read more: Our picks for the best secured credit cards and best credit cards for college students today.

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to the Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn't include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.

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