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Are Credit Cards a Necessity or a Luxury? We'll Help You Decide

Madhushree Kelkar Apr 17, 2019
Do you really need a credit card? Or is it a luxury? Well, that depends on what you are going to use it for. Here is the popular debate on whether credit cards are a necessity or a luxury.
You don't realize how much you use your credit card not even to buy things. It's a card you get so you can navigate society.
― Adam Carolla
Most of us would have at some point used credit cards to buy stuff which we didn't really need. Using a credit card always feels good till your eyes pop out at the month end when the long bill reaches you. Some consider credit cards to be an outright extravagance while others think that they are a necessary evil. So, are credit cards a necessity or a luxury?

Credit Cards as a Necessity


If you are traveling to a distant place, carrying your credit card instead of cash will be beneficial for you. If you lose your credit card, you can block it immediately before someone else misuses it.
Moreover, a credit card helps you to acquire something or make the payment for it even when you do not have cash in hand. This is important in today's times when the threat of having your cash stolen looms large.

Expense Tracking

If you pay for your transactions in cash, you may not be maintaining a record of the same. Just imagine how difficult it would be for you to keep a track of all your expenditures at the end of the month or for tax purposes.
Imagine running from pillar to post trying to get hold of all the receipts at the end of the year. This is when your credit card statement's year-end summary will help you track all your records.

Emergency Expenses

Think about this; you are out for a long drive with your girlfriend and your car has broken down. Now you need to pay the vehicle towing agency but you don't have enough cash.
Having a credit card handy can help in bailing you out of this situation. Also, owning a credit card will enable you to pay for the medical expenses in case of an unforeseen medical emergency, even when you do not have enough cash reserves.

Capital Expenses

Imagine that you want to buy a new property. You have to make a down payment of a certain amount but do not have enough cash. In such a situation, having a credit card will help you to pay for things that are expensive and out of budget. Having a credit card also helps in building your credit when you indulge in a major buying decision.

In E-commerce

In today's time when we pay our bills and buy stuff over websites, a credit card becomes indispensable.
It makes the payment easy. The e-commerce industry is heavily dependent on credit cards. As a customer, it is good to have one for carrying out hassle-free transactions online.

Rewards and Other Benefits

Using your credit card for payment of air tickets can help you earn reward benefits in terms of airline miles.
Similarly, credit cards can also help you in getting auto points. Using your credit card wisely can help you get credit card rewards, discount packages, rebated cash back offers, loyalty points and other special incentives offered by credit card companies.

Credit History

A credit card can be used to increase your credit score. Your credit score increases when you pay your bills on time. Disciplining yourself to pay your credit card debt every month without keeping any dues can certainly help you prove that you are a person with a credible credit history. This will help you enhance your credit score.
Also, if you repay your credit card amount from time to time, you may not have to pay the interest on it. Not only this, but it will also help you build a good credit history for availing loans.

Credit Cards as a Luxury

Status Symbol

A few years ago, there was a general belief that only people of a high financial standing could afford to have a credit card. This initiated a trend of acquiring credit cards. Today, there are many who have more than one credit card. Take a good look at your girlfriend's credit card holder and you would know what we mean. Do we really need so many of them?

Irresistible Temptation

Ask yourself how many times a credit card has compelled you to buy something that you have regretted later. That's how it is.
When buying something using a credit card, you don't think if you really need it; you simply buy it! You know that you have the power to purchase, and this forces you to make the buying decision. Most of the time, these impulse-driven credit card purchases are items which may not be necessities.

Spending Beyond Budget

Imagine that you have gone to a restaurant with only cash in your wallet. This means that you are completely aware that you will have to fit your expenditure within the given budget and will not allow it to increase. However, carrying a credit card means that you will definitely end up spending more.
By just looking at a stash of cash, you will feel like controlling your expenditure. But you will overindulge with a credit card. For instance, if you had decided to not go beyond $50, you will end up spending, say $70 just because your credit card allows you to. It means that credit cards make you spend more.

Increased Expenses

As they say, "nothing comes for free". There are chances that the credit card fees and heavy interest rates of your credit card are far more than the rewards and benefits offered by credit card companies. Remember, with the growth in your balance, your monthly minimum payments will also increase.

Debit Cards Can Work Too

Gone is the time when one was overly dependent on credit cards. Today, debit cards can be used for the same purpose as credit cards. In fact, using a debit card ensures that you do not shop for more than the amount you have in your account. Hence, in comparison to a debit card, a credit card is definitely a luxury.

Payment is a Problem

Try to skip a credit card payment and you will be shocked to see a plethora of charges added to your bill. Thus, owning a credit card can prove to be extremely expensive. Due to the fees and the interest, you always end up paying more for the product you purchase than what you would have paid through cash.

Cash Advances

The option of availing cash advances against your credit card often leads you to applying for them even when it's not necessary to. The cash advance fee claims a percentage of your cash advance. Advances have a higher interest rate as compared to that of the purchases.
For some, a credit card is a useful financial tool while it is a source of unnecessary expenditure for others. To decide whether a credit card is a necessity or a luxury largely depends on its use. You can either use a credit card for your financial vantage and utilize it wisely, or give in to the temptation of impulse shopping and end up in debt.
Now that you know about the pros and cons of owning a credit card, decide for yourself if they are a necessity or a luxury. The key to using a credit card is to control your expenditure, and not let the credit card control you.