In a previous article, we discussed about how credit cards get a bad reputation because of the interest trap. But somehow, they remain one of the most used and preferred short-term borrowing methods out there. So, should you get a credit card in your teen years? Let’s find out.

A little bit of history of the credit cards…

First formats of the modern day credit cards date back to the 1950s. Back in the day, when your parents were teens, credit cards were still a relatively new term and as with anything new, they were scary. The banks themselves made the first mistake with credit cards. The foremost credit card known as Bank Americard was mass distributed (appx 100 million cards) among the US citizens without checking any background or financial history. This obviously drove the economy and people to a crash when they could not repay the debt owed. So began the scary stories.

Back to the future…

This scare has left a permanent mark in societies all around the world. Some people despise of even getting a credit card with worries of falling into a debt trap.

So should you be getting a credit card as soon as possible?

The simplest answer is, yes!

But you should be a person with self control and not an impulsive spender. As long as you manage your expenses, even with a credit card, within the limits of your disposable income, you are golden. What does this mean?

Disposable income is whatever the portion of income you are left with after deducting statutory payments such as income taxes, municipal rates etc. Disposable income can be spent on anything you want; be it groceries, medicine, education, entertainment, to save etc.

So, use your credit card to the limit that you are capable of settling with your fixed income sources.

For an example, if you have fixed income sources of $1,000 a month and you pay $100 income tax on this, you would be left with $900 disposable income. So, essentially, you can use your credit card to a maximum of $900 each month. This way, you know that you will be able to settle off the credit card statement balance each month and live a stress-free life.

If you are to use the credit card only to the limit of your income, you might ask, why get a credit card in the first place?

Well, credit cards offer many more benefits than just an extra line of credit. Check the below list for some of the most common advantages of using a credit card.

Benefits of having a credit card

• many credit cards come with offers for product discounts (Eg: groceries, hotel stays, movie tickets, foreign tours etc)
• most credit card companies offer reward points on the usage of the card, which can be accumulated to be redeemed for financial and non-financial benefits for the card holder
• emergency source of funds
• ability to make payments online
• ability to carry and make payments around the world
• secure than carrying cash around

The first two benefits mentioned here are a must to be exploited by the card holder. This way, the cardholder actually pays less for a product than they would have purchased the same product for cash. Earning reward points that are convertible to cash or other benefits is essentially increasing your disposable income without having to work extra hours. Who wouldn’t want that?

So as long as you use the credit card within your means of settling it, using a credit card is an absolute YES!

Should you get a credit card without having an income source?

This an obvious ‘no-no,’ because the chances of you running into a debt trap is 100%. Also, chances are the banks will not offer you a credit card without an income source.