Should you get a credit card?
Should you get a credit card?
We're all constantly told to stay away from debts and credit cards especially and it is easy to see why. The high interest rates, potential charges and the way the debt just seems to last forever if you're only ever paying off the minimum required payment each month can end up quite troublesome if your income changes or you do not stay constantly on top of your credit card bills and payments.
Despite the obvious cons, there are many reasons why you should get a credit card and can offer you an array of benefits; if you are careful.
A credit card will help you to build up a credit history which in turn will then open further credit options to you, with those having a good credit history getting the opportunity to take out loans and credit cards with lower interest rates, therefore saving money!
It is essential that if you are applying for things like a mortgage, which will be your biggest debt and therefore comes at a risk to the bank that you have a good credit history. As a result you may find you are advised to regularly use a credit card. This does not mean build up a huge unmanageable debt or spend more than you can afford. Use your credit card as a payment method, pay off the debt each month and repeat!
New credit card deals regularly are available with the things like 9-12 months of interest free purchases, therefore costing you nothing as long as you don't have the debt rolling over beyond this period. This is an advantage for those who do not seem to have much money left at the end of the month until payday but can still afford to repay the debt each month.
Reward credit cards are also worth looking into as they of course have the advantage of giving something back to the user as a thanks. This can be things like cashback, points or airmiles which can then be redeemed in the future. A great way of saving money as long as you don't slip and end up paying more on interest and charges on your credit card than necessary.
To get the most out of these credit card advantages it is essential that you are aware of all of the problems that people get into. Examples of such include using your credit card to withdraw cash; this will typically be charged at a higher interest rate than purchases on your credit card, will not be eligible for most offers such as the first few months of the card being interest fee and on top of that you may find you get charged a standard withdrawal fee of around £3. A simple £10 cash withdrawal can easily end up costing you double due to interest and the charges.
Always aim to make more than the minimum repayment, some people often overlook the interest costs which are accumulated if you stick to making the same minimum payment each month. Although only needing to pay £20 a month on your £500 credit card debt looks affordable, a look at the long term numbers behind this will show you just how much you will be paying overall and for the length of time you will be doing so. Chances are you will be shocked into paying more than the minimum, purely to prevent interest building up.
Ultimately, the use of a credit card can provide you with benefits you just need to ensure you are aware of the potentially pitfalls can common traps then many people fall into. Doing this will stop you spiralling into uncontrollable credit card debt.
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