This post is in partnership with Lexington Law, thank you for supporting brands who support TCM. As always, all thoughts, opinions, experience, and advice is my own.
Do any of these sound familiar?
You're a new college student, eager to finally break out on your own! Independence has never tasted so sweet, especially with that new plastic credit card in hand. And the best part? It doesn't go to your parents! Total freedom! You start charging away to pay your new bills or just have fun with friends… and before you realize it you've maxed out your card and missed a payment. All of the sudden the sweet taste of freedom tastes more like a sour apple.
Or better yet… you're finally post-grad with your first real 9-5. You've got benefits! Like, what are those even!? While you're still underpaid, you've never made this much money in your life! So you decide to finally get rid of the awful roommates and move into your own place… Only living on your own costs a lot more than you realize so you start opening up all the store cards when they tell you about the massive discount you'll get on your furniture purchases… I mean it is saving you money afterall, isn't it?
Until you get all of the bills piling in. Everything from the new store cards, movers, and utility bills you've never been fully responsible for hanks to those roommates who used to split them with you… Before you know it, you have a bunch of bills you can't pay, and there's so many you don't even know how to start paying them off! Instead, you pile them all in a corner and avoid them until you forget; oops!
Now you've missed a payment, and you still don't have the money to pay it off. Then you see an offer for a 0% interest credit card so you open that up, hoping it'll help you get ahead as you pay off the other debts… only the 0% interest only applies for a short period of time and all of the sudden you're hit with a 25%+ interest charge on the card you've been charging everything too…
queue tears, mini meltdown, WHY IS ADULTING SO HARD?!?
Or maybe you've actually been super responsible with your finances and don't relate to either of those stories. You always paid your credit card bill on time and feel good about it. But you never took the time to create an emergency fund. Then one month you're laid off from your job and get sick. You're too sick to work and the medical bills start rolling in. Without an emergency fund, it seems you have no other choice than to open a credit card to start paying off the bills. Before you know it your excellent credit score is quickly falling into the very poor range as the debt racks up each month.
Yepppp if you have some variation of these credit card stories you are definitely not alone!
I've said it before but I'll say it again: It takes time to build up a great credit score and minutes to destroy it. With that said, you shouldn't be afraid of credit cards. Credit cards aren't the enemy here. By not using credit cards, it could be costing you in so many other areas. You're past mistakes and the hurdles you've faced shouldn't dictate how you live your life today.
Here's 4 Reasons You Shouldn't Be Afraid Of Credit Cards:
You need to build credit
Whether you like it or not, you have a credit score. Unfortunately, when you chop up your credit cards and it doesn't magically erase your credit score. It's like getting married, only you can't divorce it. So you need to work with it. Your credit score is going to impact your ability to rent or get a mortgage, get car insurance, and can even play a role in getting a cell phone! Read more about the ways credit impacts your life here.
Credit cards are one of the easiest ways to build good credit
Okay, this is my opinion, but many would agree since at the end of the day you are choosing what to charge. No one is forcing you to max out your credit card. If you only charge your Netflix subscription to your card every month, and pay that bill off in full every month, that's building good credit. It can really be that simple. This task alone will show that you can consistently pay your bills on time (worth roughly 30% of your score), while elongating your credit history (roughly 15% of your score), and keeps your credit utilization low (roughly 30% of your score).
Credit cards are more secure
I know most people are afraid of credit cards because of identity theft and fraud. But the reality is, credit cards are more secure than debit cards or cash. With cash, once it's gone, it's gone. If someone steals your debit card, once they take that money out it takes a lot longer to get it back in (if you even get it back). Then if you have bills auto set up on your debit card, you could end up over drafting your account that was just drained by the thief! That's the real nightmare!
Credit cards actually can reduce your liability in cases of fraud and theft. Plus, it protects you if someone you paid with your credit card shuts down their services before they've delivered what you purchased. With credit cards you'll also generally see the money back quicker in your account, since typically when they're investigating they'll give you a temporary credit to your account of the missing funds, and will only take those funds back if the dispute you filed ends up not being in your favor.
Plus fear of security and identity theft isn't an excuse to avoid credit cards. There are services like Lexington Law Firm's Lex OnTrack Identity Theft Protection Tool. It monitors your identity 24/7 while protecting you from identity theft with $1 million in identity theft insurance. The experienced lawyers at Lexington Law also focus on consumer protection laws to keep your identity safe. Beyond protecting you, the Lex OnTrack tool allow your to track your credit and FICO score and has visual tools to help you manage your finances for the future. Sign up online for the Lex On Track Identity Theft Protection Tool here.
You can earn rewards
It's a great starting place to get in the mindset that you're credit card is basically a debit card (meaning you have the mentality that you only charge something to it if you have money in the bank to pay it off that day). But once you've gotten into that mindset, it's an opportunity to have your credit card work for you. Listen, you aren't going to get rich off your rewards, but it's always nice to have your money working for you in any capacity. Look into cash back cards, cards that give discounts or general rewards, travel rewards, etc. You can read about what to look for in a rewards credit card here.
Letting go of fear around credit cards
By now I hope you're feeling less afraid of credit cards. Remember, it's your choice how you use them. No one can make you swipe your card, so don't do it. Leave it at home if you think you'll be tempted. If you're ready to start repairing your credit, I'd recommend checking out my friends at Lexington Law Firm who have over 10,000,000 negative items get removed from client's credit reports since 2017! Stay tuned to the blog next week where I'm going to share more about what to do with your tax refund when it hits! SPOILER ALERT: it may include prioritizing yourself and hiring the professionals at Lexington Law firm to finally get where you want to be financially!