Credit cards – everyone is using one, should I?

Are credit cards really worth using? How can you actually benefit from using a credit card – or are there no benefits whatsoever?

Here, we will take a look at some of the advantages and disadvantages of using a credit card to help you see if using one could benefit you.
Advantages

• Buy now… pay later. By using a credit card, you can buy something at the start of the month, and only actually have to pay for it at the end of the month (which is when a lot of us get paid). So in general, credit cards are actually giving you free access to credit for a short period of time.

• Improve your credit rating. Providing you are able to make your payments on time, you should be able to improve your credit rating. By repaying your debts on time, you are showing lenders you are able to borrow money and repay it, without any problems. This should help you out if you need to borrow money in the future.

• 0% balance transfers. With some credit cards, you are allowed to transfer your balance from one credit card to another – one that’s charging less (or no) interest, for example – for a specific period of time. However, there is sometimes a one-off fee charged for this service.

Disadvantages

• Low minimum repayments. Although repaying a small amount each month can be very affordable, if you choose to repay the very minimum, you will be in debt for longer – and it can cost you a lot more than you expected.

• Your circumstances may change. If your circumstances suddenly change (for example, you lose your job), you are probably going to experience difficulties in repaying your debt. If you fail to repay (a portion of) your debt when required to, you may be fined, and it will be noted on your credit report.

• Inactivity charges. If you don’t use your card for a while, you may be penalised for this (the terms and conditions of your credit card agreement should state this). You can avoid these charges by using your card every now and then for small purchases (ones you are certain you will be able to pay for at the end of the month).

It is important that if you do use a credit card, you keep your spending under control. It can be quite easy to lose track of your spending at the best of times, so make sure you are always aware of how much money you have spent/have left to spend.

If you find yourself losing control of your spending and end up struggling to keep track of several manageable debts each month – but would simply like to make them easier to keep track of – you could consider debt consolidation.