Bad experiences or no experiences with credit cards may have the effect of turning you away from them. However, you can conquer your fear of credit cards by becoming knowledgeable about how they work. Understanding how credit cards can be used as tools to better your finances is all the power you need to become confident in your credit card use. Here’s how to beat your fear of credit cards.
Don’t Fear the Unknown
“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” —Marie Curie This sentiment is as true for public speaking and riding roller coasters as it is for using credit cards. Just because you don’t understand how credit card debt works doesn’t mean that you should avoid long-term financial planning or be afraid to even apply for a credit card in the first place. By coming to a few simple realizations, you too will be able to learn how to conquer your fear of credit cards.
Do I Even Need a Credit Card?
To be perfectly frank, there are millions of people that can get by without using credit cards or even having a bank account in their name. That’s fine if all you want to do is get by, but you’ll need a personal finance plan to earn a good credit score and establish the kind of credit history that will qualify you for a loan to get that car or house you’ve always wanted.
Even if you’re opting to rent for the rest of your life, some landlords will dismiss your application if they see that your credit report isn’t established enough. This is known as having a thin file, and in many cases, makes the chances of you moving into an apartment slim to none. When used responsibly over a period of time, credit cards can be the tools that will build the foundation for a prosperous financial future.
Learn Before You Leap
If the fear of mounting interest rates or your ever-present student loan debts has kept you from applying for a credit card, learning how to use them responsibly can go a long way in demystifying them. There are countless blogs on the internet written by professionals (like the one you’re reading) with the sole purpose of providing you with knowledge about the credit card industry.
Pulling up your favorite web browser on your phone and spending a few minutes reading posts from experienced and reputable individuals may answer some of your questions about how to build your credit, pay down your credit card bills fast, and other related topics. Credit card issuers themselves are also a great source of knowledge that you can take advantage of when learning how to conquer your fear of credit cards. As they want you to sign up for their financial products, they’ll do their best to provide you with the information that puts their credit cards in the best light.
You can again rely on the internet to do your due diligence, but most major issuers can also be conveniently reached over the phone to answer questions that you may have as well. Combining the info you get from credit card companies and unbiased online reviews should give you a good indication of which credit card is best for your specific situation.
Build and Maintain Responsible Financial Habits
Not paying the balance in full on your credit cards in the past may have led to lots of fees and debt, but there are programs available now that are designed to help you manage how you use them. A quick search online will show you that many lenders and third-party companies have created intuitive applications to help people manage their credit card debt. These apps often allow you to make automatic payments and send alerts right to your phone if you hit certain credit card balances, reducing the chance of your debt becoming past due.
Spending within your budget is an important lesson when overcoming your fear of credit cards, too. Opening a low introductory APR balance transfer credit card in order to pay less interest on your current debt may seem like a good idea, and there are ways to do so, but if you continue to create debt without paying it down the cycle of making only interest payments will never end.
Habits to Avoid:
| Ignoring the Signs | Do not ignore your credit card balance. Credit card apps are an easy way to manage and keep tabs on your card balance. Use the apps to stay alert on charges, billing due dates, and more. |
| Not Knowing Your Credit Score | Knowing where you stand with your credit score can help you capture mistakes to correct. Often checking your credit report can help guide and provide insight into what you need to work on to build or repair your credit. |
| Not Setting or Keeping a Budget | Planning a monthly budget and setting financial goals helps credit card users stay responsible with their credit card spending. Budgeting creates a plan for your money on what you can and cannot spend to remain current with your credit card payments. |
| Maxing Out Your Credit Cards | Maxing out a credit card is never a good idea, as it significantly affects your credit utilization ratio. Experts recommend keeping your credit utilization ratio at 30% or less. |
| Balance Transfer Overload | Balance transfers create an option for those who wish to transfer existing credit card debt to another to gain a lower interest rate to save money and pay off debt faster. It's essential to plan your balance transfer payments and goal to pay off your transferred debt before the promotional low APR period is over. Otherwise, you will continue to rack up interest on your credit card debt. |
Scale Up with Secured Cards
Secured credit cards may not have high credit limits or impressive rewards but using them is still a great way to improve your FICO score if you don’t qualify for an unsecured credit card just yet. Even with bad credit or no credit, chances are that you’ll be able to put money down and open a secured credit card. Ideally, you’ll want to find a secured credit card that can become an unsecured credit card. All you’ll need to do then is pay your balance in full every month and maintain a low credit utilization ratio (not maxing out your card’s limit) in order to increase the chances that your next credit card application will be approved.
Related Article: Why Secured Credit Cards Help Build Credit
| Card | Features | Annual fee |
|---|---|---|
First Progress Platinum Elite Mastercard® |
|
$29 |
OpenSky® Secured Visa® |
|
$35 |
Self Visa® Secured Credit Card |
|
$25 |
First Progress Platinum Select Mastercard® |
|
$39 |
FOMO No Mo’
The fear of missing out on fun activities because you’ve got to pay down your credit card debts instead may seem like a good reason to be afraid of getting one but think about what you won’t be experiencing if you DON’T have a credit card. There are people who, with careful planning, take their entire family on trips all over the world free of charge using only the points they’ve earned on their rewards card.
That sounds like a much better deal than any discounted hotel rate you may come across online. Following the advice given earlier about learning the ins and outs of credit cards, you’ll be able to find one that not only gives you the rewards you want but allows you to earn points or miles on purchases that you’re already making every day. It may sound like a dream scenario, but it can very much be a reality for you as soon as you overcome your fear.
Related Article: How to Prepare Before Applying for a Credit Card
Featured image by A. Solano/Canva
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