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Today credit has evolved into a way of life. It's reached the point many people are trying to reduce it because debt has gotten too far out of hand. Rather than risk the temptation to succumb to the ease of using a credit card for spontaneous purchases, the philosophy is to cut them up and close the accounts.

While this eliminates the enticement to overspend beyond our means, by getting rid of our credit cards we may find it creates other dilemmas. There are many situations where having a credit card is very beneficial and while the easiest solution may be to simply get rid of the plastic, it might not be a bad idea to hang onto one or two of them (make sure the one you choose carries no annual fee and offers a low annual percentage rate).

Why it may be beneficial to hang onto a credit card or two:

*Build credit. One of the many benefits associated with possessing a credit card is it gives you the opportunity to build good credit and keep a decent score. It may not seem important, but if you ever want to make a large purchase such as a car or a home, having a good credit card rating may make all the difference in the interest rates you receive on your big ticket acquisitions. Bad or no credit may cost you in the long run.

*Rentals. Whether renting a car, most car rental agencies require a credit card to accompany the agreement contract. While you may not frequently have the need to rent a car, if you ever do, you'll be sorry you didn't have a credit card.

*Reservations. It's next to impossible to reserve a hotel room or an airline ticket without a credit card online or over the telephone. Even the automated check-ins at the airport nowadays requires an I.D. to be swiped through the machine in order to obtain your ticket, and this usually is requested in the form of a credit card.

*Emergencies. There may come a time where you are stranded with a broken down car or left in a dire situation where you need to make an emergency purchase. Chances are you won't be carrying around a huge stash of cash and possession of a credit card can get you out of your situation.

*Convenience. E-commerce is the wave of the future and as more and more shopping and purchasing opportunities become available online, it simplifies things for you if you have a credit card. Many companies now offer "web specials" where discounts are given via the Internet. If you are strictly "cash and carry", you'll not only miss out on the convenience of shopping online, but also the chance at some of these terrific discounts.

*Earn money. This isn't a given, but it's quite possible you might be able to obtain a credit card which actually pays you to use it. I have a card through my former union and each purchase goes towards a total amount which equates to a percentage refund. I typically get approximately $80.00 back every couple of months. I think the company hopes consumers carry balances and they make their money back on interest, but with customers who pay off their balance each month, it's a great opportunity to put money back in your pocket.

Possessing a credit card does not mean it's a good idea to max out the credit line or carry a high balance month to month; this is one of the pitfalls to avoid. When making purchases using a credit card, make a pact with yourself to pay it off every month; you earn the interest on the money sitting in your bank account until the bill comes due and at that point simply pay it.

There are many good reasons to have a credit card, as long as we use them wisely and maintain a level of discipline. Falling into the debt trap negates any benefits credit cards have to offer, but by using them and practicing smart spending, there are many benefits which can be derived.

Learn more about this author, Leigh Goessl.
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