Is it Wise for me to get a Credit Card?


Many people have credit cards and find that they are a really convenient way to buy things. However, there are risks associated with having them and it is wise to be aware of those and what you can do to minimise them before you decide whether you should get a credit card or not.

Cost

A credit card can seem like just an innocent tool to buy things with and so many people use them it is easy to think that they are harmless. They are set up so that you can use them for free if you want as well. So, if you repay the full balance owed on the credit card each month then you will not be charged any interest on it. It can be wise to set up a direct debit to do this and then you will not forget to pay it off and there is no risk that you will be charged. Around half of the people who own credit cards have some debt outstanding though. Credit card debt is expensive and so they will be paying a lot of money for the privilege of being overdrawn.

There are some interest free credit cards but the interest free period will only last for a small amount of time, normally less than a year. Then you will need to start paying interest on the debt and this can be even more expensive than a conventional credit card. Unless you are sure that you can pay it all off after the interest free period ends or at least pay it off very quickly, then it is best to avoid this type of card.

Overspending

When you have a credit card it can be really easy to overspend. You might not notice that you are spending lots of money as you will just be popping it on the card. It is really easy to spend a lot of small amounts of money and for it to quickly add up or for you to buy things without really noticing how much they cost and spending more than you can afford. It can be that only when you get the bill do you realise that you have spent more than you can afford.  Then it can be very difficult to find the money to pay it all off or you find that you cannot pay it all off and you have to start paying interest on it instead.

It is also easy to think that you can spend all of the money available on the credit card as it is for you to spend. You can have fun with it and buy things that you really want. However, the problem with this is that it is easy to forget that you will have to repay the card eventually and that you will have to pay interest on the card. If you add on the interest to the cost of the items that you are buying with the card you may feel that you would not have bought them had you known that they would be that expensive.

Fraud

It is possible that if you have a credit card that you could be exposed to fraud. If anyone gets hold of your credit card details then they can use those details to buy things online. This means that you could end up being charged for items that you have not purchased. This can be a worry for some people and may stop them even taking out a credit card. However, credit card companies are very aware of the problems that face card holders and so are always on the look out for suspicious behaviour. They will also deal with problems of fraud very efficiently and will have a fraud department that will enable you to report problems very quickly so that they can sort it out and reimburse you if necessary.

So, although a credit card is nothing to be afraid of you will need to be sure that you will use it responsibly. You should not see having one as an opportunity to spend lots of extra money but just as a convenient way to shop and not pay for goods until you get your bill. You need to make sure that you pay off the bill in full by the required date so that you do not get charged any interest on it and that you do not spend more than normal just because you have a card. It is wise to keep a track of your spending and make sure that you have enough money to pay off the bill when it comes. This may mean that you need to transfer money to a savings account so that it is available when you need it and you are not tempted to spend it. You may find it easier to track your spending using online banking.