Talk to your debt analyst today +1 (888) 889-7130

Credit Cards: A Financial Crossroad

Posted by Advocate Debt Relief Team

2 years ago / May 9, 2022

The tempting allure of money at our fingertips is hard to turn down. Many of us will justify a credit card by keeping it for “emergencies only,” but that strategy often gets derailed. That trip with friends we can’t reasonably afford, the impulse purchase at our favorite department store or the happy hour that goes beyond the discounted drinks can easily lead to a credit card being swiped when the bank account is low.

If you’re at a financial crossroads and find yourself debating whether or not to get a credit card, you’re not alone. When you know how credit cards work, you can adopt a mindset that will keep you out of debt and help you step into financial freedom.

The Basics

What is a credit card? It acts as a loan or line of credit that allows you to make purchases today and pay them back another day. These are issued by a credit card company or a bank with a maximum credit limit on the card. A minimum payment is required at the end of the month, based on how much money you owe and your current interest rate.

Most credit cards are accepted at most retailers online or in person. Health care providers and insurance carriers will often allow you to pay a bill with your credit card; however, some accounts are excluded. Monthly rent, mortgage payments, taxes, student, auto, and personal loans cannot be paid with a credit card. Many retailers also have a minimum purchase amount on cards because of processing fees.

Credit Card Mindset

The first question to consider when at the financial crossroads of getting a credit card is, “do I already have a lot of debt?” If the answer is yes, start with uncovering why. Perhaps you don’t operate on a budget and tend to overspend. Maybe your car payment rides the line on too expensive. Whatever the reason, take a hard look at what you already owe and assess whether or not you can take on additional monthly payments. 

One of the best ways to successfully manage a credit card is to adopt a “30-day free loan” mindset. Typically, you won’t pay interest if the entire balance is paid off within 30-days. As long as you know the benefits and the drawbacks, you’ll be able to set parameters for yourself to keep your spending in check.


  • Credit cards help to build credit history.
  • Increases your credit score when used correctly.
  • Offers protection against fraudsters.
  • Many cards offer rewards like frequent flier miles or cashback.
  • It enables you to reserve hotel rooms, rent cars, and shop online.
  • It helps to make purchases in case of an emergency.


  • Interest is charged for balances carried beyond 30-days.
  • The longer the debt is carried, the debt gets more extensive.
  • Annual fees.
  • Cash advance fees.

Types of Cards

Many kinds of credit cards are out there, so it’s essential to find one that works best with how you plan to use yours. Each one has its benefits and drawbacks that can be worked to your advantage.

Department store credit cards — Branded retailers like Lowes, Best Buy, or Sears offer department store credit cards. 


  • A “sign-up discount” on your current purchase.
  • Sometimes they offer special discounts.
  • Regular ongoing discounts. 


  • Higher interest rates (usually).
  • It can be mildly harmful to your credit score when you sign up.
  • Less flexible than a regular credit card — Most cannot be used outside of that specific establishment.

Travel credit cards — Credit card companies will collaborate with airlines or hotels that give incentives toward travel-related spending.


  • Can earn frequent flier miles.
  • Priority boarding.
  • Complimentary seat upgrades (pending availability).
  • Free baggage checks.


  • It is sometimes limited to one airline.
  • Annual fees.
  • Difficult to redeem rewards.

Secured credit cards — The credit card company requires a deposit equal to your line of credit to make purchases. This ensures that you won’t default on payments.


  • Easy approval process.
  • Can raise a bad credit score.
  • Some have rewards.
  • Enables hotel and rental car reservations with lousy credit.


  • Annual fees.
  • Higher interest rates.
  • Cash on hand is needed to start one.

Cashback credit cards — give you cashback as a reward for a tiny percentage of your purchases. 


  • Many offer a 0% APR as an introductory offer.
  • Some offer cashback sign-on bonuses.
  • Most have no annual fee.


  • High APRs after the first year.
  • Foreign transaction fees.
  • Rewards caps.
  • Seldom offers travel rewards.

Balance transfer credit cards — This card enables you to transfer multiple card balances into one card, often with little to no interest during the introductory offer.


  • Introductory periods range from 6 months to 24 months.
  • Consolidate payments.
  • Save on interest (depending on your situation).


  • Interest rates increase significantly after the introductory period.
  • Usually, a 3% balance transfer fee is added.

What to Know About Repayment

Although a minimum payment is due every month, it’s in your best interest to pay more. Only paying the minimum amount will keep you in good standing, but you’ll pay interest. These rates are calculated slightly differently from card to card and can get pricey. Making an extra payment during the monthly cycle can be beneficial to pay less interest.

Credit cards all come with an APR (annual percentage rate). These depend on your current credit score, employment, and other factors. A good credit score will give you the best chance at the lowest APR available. Be sure to check the APR beyond the introductory period to get the best sense of what you’ll pay going forward.

Credit cards come in various types and are often attractive at first glance. Before you pick a path, be sure to weigh out the benefits and drawbacks first. It will save you time and money, but you’ll also wind up at a better financial destination.

Share This Article:

Filed Under: Budgeting