5 Signs You Aren't Ready for a Credit Card


There are plenty of smart reasons to apply for a credit card. Having a credit card can give you financial flexibility, provide a way to build or boost your credit, and offer a range of valuable rewards, cash back, and perks. But having plastic at your disposal is not all fun and games.

Having a credit card can cause problems if you're not quite ready for one. How do you know if you're not ready for a credit card? Here are a few surefire signs.

1. You don't follow a budget

The key to using a credit card properly is knowing how much you can afford to charge each billing cycle. The goal is to make charges during the month and pay off your balance in full every time your payment due date rolls around. This way, you'll steadily build your credit history along with a strong credit score. But if you don't have a budget, you won't know how much you can afford to charge each month.

Before applying for any credit card, make sure you've drafted a budget that includes your monthly expenses — including those that change each month and those that are discretionary, such as entertainment and eating out — and your monthly income. This will provide a guide for how much you can afford to put on your credit card without running a balance from month to month.

Running a balance is a huge financial mistake. Credit card debt comes with high interest rates, and if you don't pay off your balance in full each month, that debt can quickly grow out of control. (See also: Stop Using These 5 Excuses Not to Budget)

2. You're often late on other payments

Do you struggle to pay your landlord on time each month? Do you often pay your cellphone bill a week or two late? Then you aren't ready for a credit card.

Credit card payments are reported to the three national credit bureaus (Experian, Equifax, and TransUnion). On-time payments will boost your score and strengthen your credit profile. If you pay your credit card bill late — 30 days or more past due is considered officially late — your credit will take the blow. A single late payment can cause your credit score to fall by 100 points or more. That late payment will also stay on your credit reports for seven years.

If you struggle to pay your other bills on time, there's no indication you'd be any better at paying your credit card bill every month. Hold off on applying for a credit card until you change your habits. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

3. You can't build up your savings

Before taking on the financial responsibility of a credit card, you should have already built up some savings. This is a sign of financial maturity and stability — the type of maturity and stability you'll need to handle a credit card.

If your bank account falls to zero (or near it) before every payday, you probably aren't ready for the responsibility of managing a credit card and the monthly payments that come with it. (See also: 8 Factors That Could Keep You Broke Forever)

4. You can't stop borrowing money from your parents

Do you frequently turn to your parents for help when the rent is due? Are you constantly asking them for extra cash when you want to go out for dinner or to a concert?

This is another huge warning sign of financial immaturity, and evidence that you are not ready for a credit card. If you can't handle your monthly living expenses without cash infusions from Mom and Dad, you'll be tempted to use your credit card to make those extra purchases. And that's a surefire formula for running up debt that you won't be able to pay off. (See also: 4 Things You Should Make Your Adult Child Pay For)

5. You don't have a reliable income stream

You need a steady stream of income coming in every month if you want a credit card. It's imperative that you're able to pay off your credit card bill in full at the end of each billing cycle. Otherwise, you risk sending yourself into a cycle of high-interest debt.

If you don't have a steady job, or if you're constantly struggling to find enough money to pay your bills each month, avoid the temptation of applying for a credit card. Instead, focus on increasing your income and building up some emergency savings before sending in a credit card application. (See also: 5-Minute Finance: Start an Emergency Fund)

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