• Ethan Lang

U.S. Credit-Card Debt Reaches $930 Billion

According to the Wall Street Journal, total credit-card balances have risen $46 billion to $930 billion over this last quarter. With debt rising at such an alarming rate, it begs the question of whether individuals should be using credit cards.

Credit Card Debt vs. Credit Card Balance

For clarification, having a credit card balance is slightly different than having credit-card debt. For example, if you buy something with a credit card, your balance will increase. However, this does not mean that you will pay interest on this debt yet. As long as you pay off this balance every month, you will not be charged interest on your debt. In fact, many Americans make purchases with their card and pay it off every month to reap the miscellaneous perks and rewards these cards have to offer.

However, do these perks and rewards justify the absurd amount of debt being taken on by Americans?

Are Credit Cards Worth It?

Commonly, this question often has no middle ground. On one hand, many individuals believe that credit cards are "evil" and should not be used. This might have been caused by their upbringing, or they might have seen the effect of credit card debt themselves. On the other hand, there are many individuals that think credit cards are "great" and should be utilized by everyone. The weird thing is that both parties are actually correct in their own way. I think the real question to be asking should be:

Are Credit Cards Worth It for Me?

First, let's talk about why credit cards are not worth it. For starters, credit card companies would not be in business if all cardholders paid off their debt in full every month. Many people's financial well-being has been ruined by large amounts of credit-card debt.

On top of this, credit cards make it incredibly easy to spend money that you wouldn't typically spend with cash otherwise. It is hard to fork over a $100 bill to go on a nice date, but it is much easier to just hand over a card. This causes many individuals to spend more and break their budget on a month to month basis.

Now, let's switch gears a little bit.

Credit cards can be a great thing. First, if used correctly, you can be receiving a 1%-2% return on everything you buy. Let's say you use the credit card for purchases totaling $10,000 a year, you will have made back anywhere from $100-$200. Other cards do not offer cashback but offer travel perks. Instead of receiving cashback, they receive points that they can use to pay for airfare and even hotels.

Additionally, most credit cards offer extended warranties on electronics. Furthermore, some credit cards offer purchase protection, price protection, and even return protection. Cardholders often never know about these perks, but they are outlined in your credit card terms if you decide to read them!

How to Know if a Credit Card is Right for You

Well, it is really just personal preference. Credit cards will not make anyone rich. Receiving $200 cashback or warranties on products is not going to make you rich, so it is not a necessity to have. Despite that, some of these perks are still pretty attractive. I will say this though. If you are an emotional spender or impulse-buyer, I either recommend not getting a credit card or paying for your emotional purchases with cash.

If you do decide to get a credit card, I recommend you follow the three rules of credit cards to help you reap the true benefits.

Final Thoughts

The benefit gained from a credit card is fully dependent on the consumer. If credit cards aren't for you, that is completely fine. However, if you do decide to get a credit card, make sure to use it wisely.