Yes, you need a credit card because it is an important part of building a good credit score. You don’t even have to make any purchases with a credit card to benefit, as simply keeping an open credit card account is enough to build credit. You may also need a credit card to complete certain transactions, such as booking hotel rooms and rental cars. In addition, you need a credit card if you want to have the best protection against fraud and theft.
Top Reasons You Need a Credit Card
- Credit building: It’s hard to overstate the value of the constant credit building that credit cards facilitate. Credit cards are the best credit-building tool at our disposal, and building a solid credit score can lead to lots of savings.
- Security: Credit cards, especially those with an EMV chip, provide extremely safe transactions and protect you from liability for fraudulent purchases.
- Rewards: Many credit cards offer cash back, points or miles for making purchases. It’s also common to get bonus rewards for referring friends, reaching an account anniversary or spending a certain amount during the first few months your account is open.
- Financing: Credit cards let you pay for a purchase over time. Some credit cards even provide introductory offers with 0% interest for a certain number of months.
- Emergency Funds: If you’re in an emergency situation without cash, you can charge a necessary purchase or get a cash advance from an ATM.
No one is required to get a credit card, and it is possible to go about daily life only using cash, debit cards and other payment methods. Still, every person should consider getting at least one credit card, as they make certain types of transactions much easier and safer to complete, in addition to providing a host of other benefits.
Situations Where You Might Need a Credit Card
Booking a hotel room
You may need a credit card to book a hotel room, depending on the individual hotel’s policies. However, the 10 biggest hotel chains in the U.S. all let you book without a credit card.
You will likely need to at least provide a debit card at the time of booking, so the hotel can place a hold for the stay and incidentals to guarantee that you pay. If you don’t want to make your final payment by card, whether credit or debit, many hotels allow you to pay with cash (or sometimes a check or money order) at check-out.
Learn more about credit cards and hotel reservations.
Renting a car
You may need a credit card to rent a car in some cases, depending on the rental agency. However, you will typically be able to rent a car without a credit card, as acceptance of debit cards is widespread.
You will usually need to have some sort of card on file so the rental agency can place a hold, but you may be able to make your final payment with cash, a check or a money order in some cases. Renting a car without a credit card might limit the types of cars you can rent, though.
Learn more about credit cards and car rentals.
Booking a flight
You do not need a credit card to book a flight. You should be able to book with a debit card, and you may be able to pay with cash at the ticket counter, depending on the airline. Some people may think it’s necessary to book a flight with a credit card, just like with renting a car, but airlines do not apply a hold to your payment method and are therefore less particular about how you book.
It may be beneficial to use a credit card to book a flight, though, as some credit cards provide trip cancellation insurance. With travel insurance, you can get reimbursed for prepaid, nonrefundable travel expenses, like airfare, if you’re trip is canceled or cut short by illness or severe weather. Plus, credit cards can save you money with rewards.
Learn more about credit cards and booking a flight.
Spending in an emergency
If you’re stuck away from home with no cash on hand, you may need a credit card to get by, which is one important reason to get a credit card, even if you don’t use it regularly. Credit cards let you make essential purchases without having the cash for them, and they can even let you withdraw money from ATMs.
If you have an emergency expense that’s less immediate, there are other ways to get funds, such as borrowing from a friend or family member, tapping into your home equity or taking out a personal loan.
Learn more about credit cards during an emergency.
There are plenty of ways to build credit without a credit card, such as taking out a loan or line of credit, or having rent payments reported to the credit bureaus. There are even “credit-builder” loans designed specifically to help you establish a credit history.
However, a credit card is the most accessible method of establishing credit because, unlike a loan, it does not require you to go into debt for information to be relayed to the major credit bureaus. Your credit card’s issuer will report information on a monthly basis, regardless of whether you actually use your card to make purchases.
As long as you don’t misuse your account by paying your bill late or maxing out your credit line, you will gradually build the credit standing needed to save on insurance premiums, buy a car, rent an apartment, get a mortgage at a reasonable rate, or land a job that requires either the handling of money or a security clearance.
Learn more about credit cards and building credit.
Most retailers that conduct business online will gladly accept debit cards and prepaid cards. Many will also accept PayPal and other mobile payment systems such as Apple Pay and Google Wallet. That means you can easily make purchases without a credit card.
Still, credit cards can be beneficial when shopping online because you may be able to earn rewards on what you buy. Plus, all credit cards come with a $0 liability guarantee. That means you are not responsible for unauthorized transactions if your card is lost or stolen.
Learn more about credit cards and online purchases.
Spending money abroad
You can use cash, a debit card or traveler’s checks in a foreign country. However, carrying large quantities of cash in a foreign country is frowned upon for an obvious reason: If you’re robbed, you can kiss your cash goodbye. The best way to protect yourself during an overseas trip is to carry a credit card with no foreign transaction fee. With this type of card, you’ll avoid paying costly foreign transaction charges, get the best exchange rates and benefit from the card networks’ zero-liability guarantees.
Learn more about credit cards and traveling abroad.
Protecting against fraud and theft
Credit cards come with security features that create a line of defense between you and fraudsters. In addition, all four of the major card networks offer $0 liability guarantees for unauthorized use of your credit card.
That protection extends to certain debit card transactions, but it is not as straightforward or all-encompassing. Cash offers no protection if stolen.
Learn more about credit cards and fraud.
Why You Should Get a Credit Card, Even if You Don’t Need One
Though you’re not required to get a credit card and could probably go through life without one, you really should consider getting one. Credit cards offer tons of invaluable benefits, from credit building and fraud protection to rewards and the ability to spend money when you don’t have cash on hand.
However, despite all of their benefits, credit cards are not for everyone. For example, if you know that having a credit card will lead you to spend beyond your means, it’s probably better to avoid having one. But keep in mind that you don’t need to actually make purchases with a credit card in order to benefit from having one. You will build credit even if you simply maintain an account with no balance.
If you’re still on the fence about whether getting a credit card would be beneficial to your financial life, WalletHub has a helpful guide on the pros and cons of credit cards.