Why Have A Credit Card?

Why Get A Credit Card?

First and foremost, take a look at the pros of getting a credit card. If you do a bit of work beforehand, you can get a bit of plastic that offers zero per cent on purchases and balance transfers for a year - something that no form of loan can match. This means you'll be able to boost your purchasing power for free, even if your income doesn't increase.

Possessing a credit card also makes it easier to make purchases online. Almost all retailers on the Internet accept Visa and Mastercard - so if there's a birthday or anniversary present that you need to buy but the shops are too far away and you're waiting for payday, a credit card can really come in handy.

Using The Internet

Accessing the Internet also makes it easier to keep tabs on the amount of money you're spending. Register to access your credit card account on your provider's website and you'll be able to pay off your monthly bill, see how much interest you can expect to be charged for the forthcoming month and apply to have your credit limit extended.

Phishing?

If you do choose to bank online, one thing to watch out for is phishing emails. With 59 million of these sent out every day, you can almost guarantee that one will arrive in your inbox sooner rather than later. Worryingly, most phishing emails look remarkably professional and convincing, which explains why one in six are opened.

These scam emails appear to come from your credit card provider and encourage you to type in your details so that they can be verified. This is something you should never, ever do, even if you think the email is genuine. It's always worth checking by either telephoning your bank or visiting its website - if you chance it, these scammers will have access to your money, and they may just spend it before you have a chance to stop them.

The Right Kind Of Credit Card

So how do you know whether a credit card is right for you? Well, it's important to make the distinction between normal debt and bad debt. Debt is, to some extent, completely unavoidable as we progress in our lives. Without taking out loans, for example, many of us wouldn't be able to go to university, buy a house or set up our own business. In these instances, debt is a means to an end and, and while it may not always be free, you'll reap the rewards later on in life. Once you own your own house, for example, you'll have more financial clout than you've ever had in your life.

Bad debt, by contrast, is using a credit card to supplement your income. Some people justify this as a way of spreading costs or a method to improve their credit scores. The reality, however, is that your credit limit is finite, even if you do get it extended. If you become reliant on your credit card for everyday purchases such as groceries, clothes and nights out, you'll be on the road to some serious financial headaches. Stop the problem from getting worse by devising a budget and curbing your outgoings.

Unfortunately, many people's budgets don't work. It might be worth getting help from someone who knows what they're doing to ensure that yours is feasible. Once you get through the first couple of weeks then things should start getting easier, and you can slowly begin to learn how to use your credit card safely and responsibly.

Getting Into Debt

If your debt problems have reached a serious stage, then don't rely on your credit card to get you out of trouble because, sooner or later, you will need to pay this debt off in addition to the amount already outstanding. Where should you turn for help? Well, if your household's annual income is below £66,000, you may be entitled to some form of benefit, and a quick check online takes just a matter of minutes.

If you want to avoid running into financial difficulties, make sure you only borrow what you need, which essentially means as little as possible. But it's not only about borrowing a limited amount - you may be the most prudent person you know, but this means nothing unless you pay back your debt quickly. If you let it accumulate and only pay the minimum amount back each month, your debt will become more expensive and will be around for much longer than you want it to.

Worse still, if you miss a payment - and let's face it, most of us have at some point or another - you can expect to be landed with a hefty charge. If you do this a couple of times you may lose the special low interest rate deals, be fined or damage your credit rating.

In Summary

A credit card is a fantastic resource as long as it's used wisely. They're especially useful when used for a pre-planned purchase, and you can be 100 per cent sure that your piece of plastic will be cheaper than any high street loan. If you do a bit of homework beforehand, it's perfectly possible to borrow at no cost, and with so many deals available and companies hoping to get you onside, you can be sure of finding a credit card that suits your needs.

Whether you've got your eye on a new car, a season ticket for your football team or a holiday for you and your family, a credit card could be the perfect way to afford it. Just make sure you draw up a repayment plan and stick to it - you'll save money, which means you'll be able to afford more things in the long run. Simple.

Useful Links

Debt & Money - https://www.citizensadvice.org.uk

National Debtline - https://www.nationaldebtline.org

Money Advice Service - https://www.moneyadviceservice.org.uk