For the short period of time that I’ve got to know Neil, I have realized that he is against credit cards. Here is the US, there are also many advocates against credit cards. The most famous one being Dave Ramsey. I cannot blame anyone for having this view because many of the practices by credit card companies over the last few years have been disgraceful. In fact, it took a credit card bill of rights to potentially put right to many these shady practices. Here are a few examples.

Yet, despite all this, for some people, credit cards can be of help in building a credit history because of the following reasons:

Credit Scoring System – In the US, an individual’s ability of get loans or a mortgage depends a large part on one’s credit history. But to have a credit history, you need to have some credit. Without any credit, you can never have a “good” credit score or FICO score as they call it here. To get a very good credit score in the US, you’ll need to have a variety of credit under your belt. For example, having a mortgage, a car loan and a credit card would help. And if you payed your bills on time every month and you do not utilize all the available credit lines you have, you will achieve a good credit score very quickly.

A good credit score means you will get lower interest rate on your mortgage or loans.

Importance also extends to businesses – Most of the job growth in the US is in the so called “small business” area where an entrepreneur starts a business. To get a credit card for a business, a credit card company looks at the owners personal credit history (and not the business history). So if you are in the US and you have a business, and you need a credit card for yourself and your employees, you need a decent “personal credit score” to get a credit card. And if you business is not well established, your personal credit score can get you business loans you would never have access to if your score was no good.

Important to rebuild credit after bankruptcy – In the US, many people file for bankruptcy because of massive debt burden that can be due to medical bills, lost of jobs and too much debt etc. Prior to and once they emerge from bankruptcy, their credit score will be very low. If the person got out of bankruptcy still current on his mortgage, then he or she can rebuild their credit faster as long they make timely payment on their bills.

For those who do not own a home or a car, but intend to in the future (which is basically most people), then rebuilding one’s credit with a secured credit card may be a very wise financial decision.

Hotels require credit cards for advance booking – Many hotels require credit cards for advanced booking. They need your credit card so that they can charge you with a cancellation fee if you withdraw at the very last minute. Car rentals also require credit cards for advance bookings.

Sometimes Credit Cards Are Just Plain Dumb – Yes, sometimes credit cards offer deals that are too good to be true. Here are a few example of how credit cards have fallen over us consumers just to get us to sign up.