USING CREDIT CARDS VERSUS REFRAINING FROM ANY LOANS 2
Who is better off: A Person Using Credit Cards or a Person Refraining from any Loans?
The contemporary consumerist society is so dependent on credit cards that one would
think there are no real alternatives. The ubiquity of credit card use creates the impression that it
is not impossible have a good credit score, deal with an emergency, or rent a hotel room without
a credit card (Lusardi & Tufano, 2015). Despite the numerous benefits that come with using a
credit card to pay bills and purchase goods, a person refraining from any loans is better off.
Spending one’s money without incurring debt and cumulative interest for failing to pay in time
enhances one’s financial health. Refraining from any debt is the better option over using credits
cards because debt hampers one’s ability to benefit from other services such as insurance or
mortgages, and unanticipated life events may make one to be caught up in a cycle of debt.
Individuals using credit cards maintain their credit worthiness based on a credit score
awarded by credit card companies. A poor score is likely to affect one’s access to other financial
services such as insurance. Some insurance companies, for instance, check the credit rating of
their prospective clients. A low credit score may lead to unexpected increases on premium rates
because they assume that a low credit score implies a high-risk client. In addition, a poor credit
score may also affect one’s eligibility for a mortgage, or the interest rate to pay in case one needs
to buy a home (Ford, 2018). There is no doubt that certain unavoidable circumstances may cause
financial strain that ultimately affect one’s ability to make monthly payments for their credit
card. Refraining from credit cards; therefore, removes the potential impediment to access other
vital financial services.
Debt comes with a huge cost through high interest rates on unpaid balances. Credit
companies, for instance, charge up to 2.5 percent interest on any monthly unpaid balances
