Credit cards can a lifesaver, if used properly and within appropriate limits. However, applying for a credit card will make a big difference to how you spend and save, so it’s worth thinking through all the factors, good and bad, before you commit.
If you’re considering getting a credit card but are unsure if it’s right for you, here information on credit cards that can help you make a decision.
Credit Cards – The Pros
Rewards – Many credit card companies offer rewards in the form of cash back, vouchers, discounts or even free travel. Depending on your interests and spending habits, you could potentially earn a free holiday or some extra cash just from using your card.
Protection – Unlike cash, if credit cards get stolen, they can be replaced without any financial impact. If you can prove you weren’t negligent or fraudulent in the theft, most credit card companies will happily refund any stolen charges.
Developing Credit – Being responsible with your cards, selecting low-interest low-fee cards to start with and paying bills on time can lead to a robust credit score. This can help you down the line if you ever need financing for bigger things like a home or car.
Credit Cards – The Cons
Price – Credit cards can be expensive. If you pay for something on credit, the sum accumulates interest and paying it off over time means you will end up paying more overall. This is a great argument for paying off the full amount by direct debit every month!
Debt – Without due care and attention, some people find themselves getting into debt with credit cards. While easily accumulated, living with debt is hard to pay off and takes time. This can prevent you from pursuing things such as moving overseas, traveling or accepting a dream job on a lower salary. Again, this is not necessarily down to the credit card itself, but to the way you manage your finances.
Lack of Patience – Being able to charge everything has the potential to limit creativity. Credit cards extend your financial capacity but this can prevent you from using ingenuity and patience to figure out how to thrive in your circumstance. Saving up and working towards something often leads to a greater sense of accomplishment than the instant gratification to which credit cards readily lend themselves.
The most important thing about credit is to budget properly and avoid frivolous spending as this will cost you in the long run.All of the potential drawbacks can be easily avoided by meeting your monthly payments and not spending more than you need or can afford. Using credit cards correctly can be a productive step toward financial independence and a great way to establish responsible spending habits.