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When Is Having A Credit Card A Good Idea?

Are you thinking about getting a credit card? There are pros and cons of credit cards and it’s important that you consider whether having one is the right financial move for you. Read more about how a credit card can be an asset and how it can cause problems.


What Can You Use A Credit Card For?


Credit cards are essentially a line of credit, or a way of spending money that you don’t have in your bank account with the understanding that you will pay it back. Many people use their credit card for all sorts of daily expenses, such as grocery shopping, petrol and transport expenses, household bills, meals out and more. Other people only use their credit card for specific types of spending, such as if they are going on a holiday or if they are buying lots of presents at Christmas.


Advantages Of A Credit Card

When used properly, a credit card can be a financial asset that will actually improve your ability to manage money and to access more significant credit in the future.

Constant Cash Flow

Do you get paid monthly? Many Australians have to wait a whole month for their pay, which can mean that by the end of the month a lot of people are feeling the pinch in their savings account. It can be annoying if you have to say no to outings because you've run out of money or if you find yourself getting stressed because you have a bill due and you haven’t budgeted properly.

A credit card allows you to smooth over these peaks and troughs, giving you access to a constant source of cash. Simply use your credit card for expenses at any time of the month, and pay your credit card bill when your pay cheque hits your account.


Helps You Build A Credit Score

A credit score is an important factor that banks will look at when you're applying for things like home loans, car loans and personal loans. A good way to build a positive credit score is to have a good history of payments on your credit card. This means that having a credit card, and remembering to always pay the bills,can actually help you access more lines of credit in the future.


Risks Of A Credit Card:

If used improperly, credit cards can harm your financial situation and you can end up paying more.

Pay More In Interest

All credit cards will have an interest rate attached to them. This is the amount of interest you pay on the balance of your card if you fail to pay it off by the due date. If you find yourself unable to pay your credit card bill, anything you bought on your credit card will become much more expensive when you need to pay extra in interest.

Overspend and Accumulate Debt

When people first get a credit card, it can feel like they have access to unlimited funds. Unfortunately, this means some people go overboard and start spending much more than they usually would. Accumulating a big debt is a problem if you don’t have the capacity to pay it off with your normal salary.

Sally Writes 25 May 2022