Deciding if a Credit Card is Right for You

Amid global financial turmoil, service members have a right to be skeptical about having a credit card. On the other hand, military families can find exclusive rates and terms on credit cards that may make them more useful and less burdensome. No two families are in the exact same fiscal situation, so it’s best to look over these tips and consult a financial planner to learn more about credit card options.

Why do you need a credit card?

For any family, credit cards come in handy in emergencies. If you plan on using your credit card for crises, then it may be ideal to look for one or two. Limit the number of cards you have because too many open accounts can hurt your credit score. For families that will just use credit to cross things off thing their wanted list, a credit card spells trouble.

While considering whether you need a credit card, think like a lender or bank. Financial institutions that lend credit cards want card holders to have a stable income. They’ll also want to know if you have any outstanding debt. So as a military member, ask yourself whether you have the income versus debt to earn a credit card. Basically, ask yourself if you can take on the cost and responsibility of paying off a credit card each month.

What terms will you get?

First of all, you’re legally entitled to a free credit report. Look over your report to plan how to increase your credit score. It may be that you need to pay off some debt or build more credit. Regardless, this report should give you a better idea of terms and rates you could get on a military credit card. Better scores, higher income, lower debt-to-income ratios and less outstanding debt usually means lower interest rates and higher credit limits.

Military credit unions

The United Service Automobile Association and the Navy Federal Credit Union offer lower annual percentage rates, frequently below 10 percent, on credit cards. Military credit cards sometimes come with reward programs and no annual fee. Other financial institutions may offer similar perks, so if you’ve been with a bank for awhile and wish to remain loyal, ask your local branch about getting a credit card. Spouses and family of service members may be eligible, too.

Accumulating a stack of credit cards isn’t the wisest thing to do. It’s an easy way to fall into a well of debt. But if you’re looking for a few cards for emergencies and you’re prepared financially, then the plastic might be what you need.

 

Photo thanks to Andres Rueda under a creative commons license from Flickr.