Ever heard of a credit card? Chances are you probably have. That’s because there are roughly 2.8 billion credit cards in circulation in the world.

If you are in America, the numbers get even higher. According to data, the average credit card per person in America is 2.7.¹ The same study shows that 14% of Americans have at least 10 credit cards!²

With so many people having a credit card, or being connected with someone who does, I think its pretty safe to assume that credit cards have really changed how we approach money.

And that’s good!

And that bad…

Today I want to talk about 9 ways that credit cards can change your life! Some of these ways are majority positive and are great reasons to get a credit card. Some of these ways are… less positive.

Let’s start with the positive ways:

1. Credit cards provide free money

Free money? Sign me up!

Who doesn’t want free stuff? Especially if it’s money?

Credit cards are great options for people who use them well to get free money. Many credit cards provide a certain percentage of your total purchases back to you in the form of money you can use for whatever you want.

Check out this site to see which credit cards come with a cash back option that you can take advantage of.

• Credit cards offer other rewards besides cash

For those of you who love to travel, this is great news for you!

There are many different options to choose from when you consider credit card rewards besides cash.

These can include travel miles, hotel points, gas credits and more!

Maybe you are planning on traveling with your family over an upcoming holiday, but flight costs have soared lately, and you are not sure you can afford them. Many airlines have credit cards they offer with introductory free miles when requirements are met that can lead to free flights for you and your family.

Perhaps you travel a lot and you like a certain hotel chain. Most major hotels offer a credit card that when used regularly, can lead to free hotel nights.

• Credit cards allow you to make small, incremental payments on large purchases

This benefit is one of the biggest ways credit cards can change your life for so many people. Sometimes there are legitimate large expenses that you need to make that cannot be paid all at once.

Let’s take having a baby. That is a large expense for most people and often requires a payment plan.

Credit cards allow you the opportunity to choose the hospital you are most comfortable with and not have to pay all the cost upfront.

Maybe you recently got in a car accident and need a new car but don’t have the cash to pay for it all upfront.

Perhaps you want to purchase that engagement ring that’s a bit out of your price range with the cash you have.

Maybe you would love to send your parents on a much-needed vacation to thank them for all they have done for you.

All these scenarios are real, life changing situations that maybe you have dealt with, or you will deal with. Credit cards provide an opportunity for you to do things that may be out of reach.

• Credit cards give added security to your money

Like most people, I am pro security. I want to make sure the things that I value are safe – family, friends, possessions, and money.

When many people thing of security for their money, they go to banks or a safe in their house.

Yes, those are certainly secure locations to house your money, but what about spending your money?

Credit cards provide you the security to know that your purchases are being monitored so you can have the confidence that what is purchased, is what you want purchased at the right cost.

If you have ever had your credit card stolen, you understand this. You definitely did not purchase that wall decal of random senior citizens sitting in a golf cart. Or maybe you did…

Either way, its great to know that your money is taken care of whether you did or did not make a purchase.

Ever had 20 dollars stolen from you or lost it in a grocery store? Could you track who spend that, contact a source of authority, and tell them to cancel that payment and give your money back. No? Me neither.

• Credit cards make purchasing significantly easier

For me, this is one of the biggest ways credit cards have changed my life. No more carrying around spare change!

And more than just spare change, I don’t need to worry anymore if I am in in target and I (let’s be honest here. My wife) finds something that is very impromptu, and I may not have the cash on hand to make that purchase.

This happens all the time too. I hardly ever carry money anymore. And going back to the previous point, that’s added security since I’m not nearly as concerned with my credit card being stolen as I am my cash.

So those were the positives of credit cards. Credit cards have their perks, for sure. As a financial coach, I’d be remiss if I did not point out some negatives to be aware of with credit cards as well. And as life changing as the positives can be, the negatives below have the possibility to be even more life changing.

1. Credit cards make purchasing significantly easier

For those of you saying, “Hey! Wasn’t this just included in the positives?” You are correct!

I wanted to make sure I included this in the negatives as well because I have seen firsthand how this has been a life changer for many of my clients.

Not to go too deep, but the psychology of money is an important point to understand here. There is a major difference on how people approach spending when it comes to cash verses credit card.

The idea of pulling money out of your wallet to pay for something is a lot harder than pulling a plastic card out for the vast majority of people.

When it comes to paying with a card, we do not see the immediate effects of that payment, so we do not always register the cost of what we bought. This can be dangerous for those who are natural spenders and its something that each of use need to be aware of personally.

• Credit cards come with added costs

Many credit cards have fees. They have fees for just owning them. They have fees for late payments. They have fees for balances not fully paid every month.

And fees add up.

Especially when you have a credit card that has a fee, and you have a late payment and an outstanding balance, and you are getting hit with all 3 fees.

Think of the money you are losing every year because of all these fees. Depending on how much debt you are rolling over, and which credit cards you have and the interest rate you are carrying, you could add hundreds (or more) dollars a year to your costs.

• Credit cards typically lead to increased debt

Of all the negative, life changing effects of credit cards, this is the most impactful. A common understood fact of credit cards is that they lead to debt. It’s really a three-step process.

1. When people have credit cards, they spend more frequently.
2. When people spend more frequently, they typically overspend.
3. When people overspend, they go into debt.

And debt can really add up. I’ve worked with clients who were upwards of $20,000 in credit card debt. I’ve heard of stories of people who were in much worse situations.

Hopefully, all the information above was helpful for you as you evaluate the credit cards you have, or ones you are considering getting. Let us know if you have any questions or comments about how you’ve learned to handle your credit cards!