Suze Orman isn’t a big fan of credit cards, but she thinks they can be useful.
- Suze Orman believes that credit cards should be used sparingly.
- Prefer cash or debit cards over credit cards.
- But she believes credit cards serve an important purpose.
Credit cards are a financial tool that has caused a lot of controversy. While some financial experts tout the many benefits of using cards, others advise people to stay away from them altogether and not use credit cards at all.
But while there are plenty of black-and-white shots with people arguing that credit cards are great or terrible, Suze Orman is a financial expert who takes a more nuanced approach. In fact, while Orman believes credit cards can serve an important purpose, she also believes they should be used “sparingly” and only in limited circumstances.
So when does Orman think credit cards are worth it? This is what he needs to know.
Credit cards can help you achieve an important financial goal
Unlike other financial experts such as Dave Ramsey, Orman is not entirely against credit cards. In fact, he has made it clear that credit cards are so valuable that all consumers should use them to take advantage of their benefits.
“I want everyone to have at least one credit card,” Orman said on his blog. The reason for that is simple. She wants people to have a card “to help build a strong credit score.”
Credit cards can help build credit in a number of ways. As you pay off your card, this creates a record of paying on time. Payment history is actually the biggest determining factor in your credit score. Credit utilization ratio (used credit versus available credit) is another important factor, and having a card helps you show that you may be responsible for not using a large amount of the credit available to you.
Because of the many ways credit cards can help you build your credit history, Orman has stated that “a credit card history is a vital part of building your credit score.”
This does not mean that Orman is a fan of using credit cards.
While Orman urges everyone to have at least one card to help build their credit scores, this doesn’t mean he wants people to load up on their cards a lot, or even open multiple cards.
“The goal should be to use it as sparingly as possible,” Orman says of credit cards. “Using cash or a debit card is my preferred way to cover most of your everyday expenses.” She suggests using the card “for a few expenses each month that you know you can pay in full” and avoiding charging anything else to the card so you don’t go overboard.
He also indicated that he is concerned when people open new cards just to qualify for cardholder bonuses. “Many credit cards offer great deals to get you interested, like no annual fee or a super low interest rate for the first year,” she explained. “Then after the first year, they’ll often start charging an annual fee and the interest rate on your balance will skyrocket to 15%, 20% or more.”
She doesn’t think you need to open multiple cards once you have one that you can use to build credit, warning that overspending is a very real risk.
Now, while Orman is right and it’s a bad idea to have multiple cards if you can’t control your spending, the reality is that those who are responsible and pay their balance in full each month could also benefit from the new cardholder benefits. . like credit card rewards.
So you’ll need to think carefully about whether you should follow Orman’s advice and use credit cards sparingly, or charging your spending to earn rewards might be a better approach for you.
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