Some people think having a credit card is not a good idea, while others say they can’t live without credit cards. But there is no denying that credit cards are valuable and come with extensive benefits and convenience.
You can use credit cards wherever you want, and they offer rewards, cashback, help you build your credit score, and are easy to carry around.
On the other hand, credit cards can be costly if you’re not careful about how you use them. It can quickly get out of hand before you even know it. There might be unpaid charges on your bill that could lead to collections, bad credit scores, and eventually ruining your financial life.
So the big question is, should you get a credit card or not? To make an informed decision, Let’s find out the following;
- Credit Card overview.
- Who should use a credit card?
- Who shouldn’t use a credit card?
- Benefits of having a credit card.
- Disadvantages of having a credit card.
- Tips on having a credit card.
Credit card overview
A credit card allows you to buy goods and services on credit. The bill for these purchases will be sent to you at the end of every month. Then you have to pay off the bill in full or partially, depending on the agreement.
Failure to repay your credit card bill will result in penalties like late fees or interest charges.
In short, credit cards allow you to buy things with money that you don’t have at the moment. You can purchase something then pay it off later with or without interest, depending on your creditor.
Who should use a credit card?
A credit card is not for everyone. You should only use one if you can handle it well. It’s ideal to use a credit card if you want to build your credit score, shop online (because they are widely accepted), and purchase things with rewards like cash back or miles.
Here are a few situations where you might want to get a credit card:
1. If you have a steady income:
This is the most important thing. If you have a steady income, it’s safe to say that you can afford to pay off your credit card bill at the end of every month.
If you pay your credit card bills on time, you can exponentially build your credit score, which will give you more favorable loan terms in the future.
2. You want to shop online:
The most convenient way to pay online is using a credit card. They are widely accepted, and you can check if your preferred website accepts them before trying.
3. You want to build your credit score:
Having a high credit score lets banks know that you’re reliable when it comes to paying bills. This means that they will be more likely to approve your loan applications when you need extra cash.
4. You want to get rewards:
Credit card rewards come in many forms, such as cashback, miles, and discounts on products or services. Some cards allow users to collect points every time they shop and redeem them for items like travel tickets.
5. You have a low budget:
If you only have a limited amount of money that you can spend every month, using a credit card might be the cheapest option. It’s easy to track your spending and payment with a credit card.
Who shouldn’t use a credit card?
As we earlier mentioned, credit cards are not for everyone. Credit card bills can add up fast, and if you can’t pay them at the end of every month, you might get stuck with a lot of debt.
Here are a few situations where you probably shouldn’t use a credit card:
1. You have bad credit:
Credit cards may help you build your credit score, but if you’re not careful with them, sooner or later, you will be in more debt. And that means ruining your credit history.
2. If you have a limited income:
If you have a limited income, you should rethink before getting a credit card. You might find it hard to pay off the bill at the end of every month. And missing any payment might result in penalties.
3. If you’re on a strict budget:
A credit card is helpful if you only want to spend a certain amount each month. But if you can’t control your spending, it’s better to stick with cash or debit cards.
4. If you’re not responsible:
Having a credit card will mean that you’ll have the bills sent directly to you every month. So if you’re not responsible enough to pay off your credit card bills on time, it’s better not to get one.
5. If you don’t shop often:
There is no reason to have a credit card if you don’t often shop or buy things online. You might get tempted to spend more than what you can afford and end up in debt.
Benefits of having a credit card:
There are several benefits. Some people think that it’s hard to get by nowadays without using one. Here are some reasons why you might want to get a credit card:
1. Improved credit score:
If you’re aiming for a mortgage, auto loan, or other types of loans, it’s best to have a good credit score. Credit cards (when used responsibly) improve your credit score and make you more attractive to potential lenders.
2. Flexibility:
You don’t need to carry a lot of cash all the time, especially if you’re traveling outside your country. Just make sure that you have your credit card with you wherever you go!
3. Convenience:
Using a credit card offers more convenience since you don’t need to carry cash all the time. You can make purchases and get bills sent to your email address, making it easy to track and pay off your credit card bill.
4. Rewards:
Credit card companies offer rewards such as travel miles, cashback, discounts on products or services, and other benefits. They usually give offers to customers who have high spending or spend a lot of money on their credit cards.
5. They are accepted almost everywhere:
This is especially true when you’re traveling outside your country. Most large businesses or restaurants accept credit card payments. You can even book travel tickets online using a credit card.
Disadvantages of having a credit card:
Although there are many benefits of using one, people who don’t use it responsibly might be overwhelmed by debt. Here are some potential downsides
1. Interest rates can quickly add up:
If you fail to pay off your credit card bills every month, interest rates will quickly add up. You might be charged around 20% or more in interest for spending on your credit cards.
2. They come with high annual fees:
Some credit cards charge high annual fees just to carry them, especially premium credit cards such as travel rewards cards and platinum cards. Make sure that the benefits of having a certain credit card outweighs its annual fee.
3. They might tempt you to buy more:
Although credit cards offer convenience, they can easily tempt you to buy more things than what you need and spend too much money. If this happens, it becomes almost impossible to pay off your credit card debt.
4. It’s easy to lose track of your spending:
You may find it easy to spend more than you can afford. This is especially true if your credit card bills are sent to your email inbox and not directly to you each month. These emails could fall into your spam folder, making it difficult to track your spending.
5. You might end up in a debt trap:
The debt trap is what many people end up in when they spend more than they can afford. Having a credit card does not entitle you to buy things you don’t need. You have to be responsible with your spending, or else you might get overwhelmed by debt.
Tips on having a credit card
>> First, make sure that you can afford to pay off your credit card bills on time.
>> You should also avoid using them for things that are not necessary or emergencies.
>> Shop around and compare the different types of credit cards available, their benefits, and terms before borrowing money from them.
>> Finally, always keep track of your spending with personal finance software like Microsoft Excel or Google Sheets.
As long as you stay organized with your finances, you can avoid the debt trap and use your credit cards responsibly.
Bottom-Line
Credit cards offer more convenience and flexibility for people who want to make large purchases and travel outside their countries. But they can also be a nightmare if you fail to pay off your bills or spend more than you can afford.
Make sure that you stay smart with how you manage your money before getting overwhelmed by debt.
