Never Had a Credit Card? 3 Smart Reasons to Open One ASAP

Most Americans use credit cards, but not all of them do. Last year, a study by The Motley Fool Ascent found that 20% of Americans don't have a credit card.

There are plenty of credit card horror stories out there. So if you've never had one, you may not be in any rush to change that. But the risks of credit cards are avoidable, and they have benefits you won't get from any other payment method.

1. You can start building your credit

A credit card is practically a must-have for one important reason: It can build your credit score. Your credit score is a rating of how likely you are to repay money you borrow, so it's a big factor in the interest rate you get when applying for a loan.

For example, if you ever want to buy a home, a high credit score could help you get approved for a mortgage and secure a low interest rate. Even if you don't plan to buy a home, there are lots of unexpected ways your credit score can affect your life. Here are a few examples:

• In most states, auto insurance companies can use your credit score when setting your rates. Drivers with poor credit pay more than twice as much as drivers with excellent credit on average, according to data from Quadrant.
• Many landlords and property management companies run a credit check on rental applicants. A lower credit score can make it harder to secure a place to live.
• Utilities companies often require a security deposit for new customers who don't have good credit. You could end up paying a deposit for power, gas, water, and any other utility services you need.

If you never get a credit card, you'll most likely have a limited credit history -- or no credit history at all. That will almost certainly make life more difficult and more expensive.

Luckily, it's not hard to build credit. If you get a credit card, use it regularly, and pay the bill on time, your credit score will improve. After a year or two of doing this and staying out of debt, you'll probably be closing in on good credit.

2. It's a safer way to pay for purchases

There are three common ways to pay for purchases: Cash, debit cards, and credit cards. Of the three, credit cards are the safest option.

Cash is the riskiest way to pay, because if it's lost or stolen, it's gone. With a credit card, you could just call your card issuer and request a replacement card, and you won't lose any money. Cash is also inconvenient -- the more you pay with cash, the more often you need to stop at an ATM to get more.

On the surface, debit cards and credit cards seem pretty similar. But there's a key difference: Your debit card is connected to your bank account, and your credit card isn't. If someone gets access to your debit card, it's possible they could take money from your bank account. If someone else uses your credit card, you can just report the transactions as fraud to have them taken off your bill.

You can report debit card fraud, too. But you may need to wait for your bank to complete its investigation to get your money back. With a credit card, you don't have that problem.

3. You could earn rewards on your spending

What I love most about credit cards is the opportunity to earn rewards. Many credit cards earn cash back or travel rewards on purchases you make. For example, if you spend $1,000 on a card that earns 2% back, then you'd earn $20.

This is an easy way to save money. I'm a fan of travel credit cards, and I save thousands of dollars every year with them. Cash back cards can be just as valuable. It just depends on which you prefer.

Not all cards earn rewards, and this benefit is less common with starter credit cards. But there are some that earn cash back or points. And as your credit score improves, you'll be able to qualify for better credit cards that earn more back.

Staying safe with credit cards

What you get out of credit cards depends on how you use them. If you follow good credit habits, you'll be able to build credit, stay safe while making purchases, and earn rewards, all without going into debt.

But what are good credit habits? There are only a few things to remember: Use your credit card for your regular bills, and never spend more than you could afford to pay back with what you have in your bank account. Basically, treat it like a debit card. Pay your credit card bill in full every month on or before the due date. If you do that, you'll stay out of debt, and you'll never be charged interest.