There are mixed opinions about having credit cards. Although it is incredibly helpful for some, it can eventually lead to more harm than good for others. People who struggle with money management should think twice when it comes to signing up for one. While others feel that having a credit card can quickly help them improve their credit score, it isn’t always that way.
In most cases, it is easier to make cash transactions, especially when you’re on a tight budget. Doing cash-based deals does not only stop you from overspending, but it also helps you in tracking expenses. Read through this article and learn about the things that you should consider before getting your credit card.
It is Necessary to Build Credit
Contrary to what the majority think, having a credit card is not the only way to improve your credit scores. There are several ways to do so, and without you knowing, you might have already been doing them all along. It can be as easy as paying your bills on time. Paying your rent, utility bills, and even car payments lead to positive credit history. To make sure that these are helping you, get in touch with your landlord, or payment centers. Ask them if these payables are being reported to credit bureaus. That way, those payment efforts will not go to waste.
Same as with paying on time, late payments can potentially affect your credibility. Most utility companies usually report late payments to a collections agency, which can affect your record.
Credit Cards are Necessary for Online Shopping
Using credit cards for online shopping is one of the most tempting things to do. It often ends up with overspending, which can have a negative impact on your credit scores. It is also one of the biggest triggers that lead to debt.
Although there are times when they would require these cards to book a reservation or purchase, there are also several options for you to avoid using such. You can use payment channels and even a prepaid debit card. That way, when you’d shop online to go for a vacation, it’ll be less tempting for you to splurge on things that you won’t need.
It Can Significantly Help in Emergencies
Using a credit card for emergencies can be helpful. Although it is often used as the primary option, it’ll be wiser to use it as a last resort. Credit cards should not be used as a fall back as it can potentially lead to more issues, particularly debt. The best way to avoid the struggle of not having an emergency fund back up is by setting aside ample savings for emergency funds.
Having enough emergency fund will help you gain confidence over your finances. You wouldn’t have to worry about going through difficult situations, not unexpected hospital visits. Placing it on an allotted bank account allows you to transfer it to the ones that you’d regularly use once the need arises.
It Helps with Savings in Every Purchase
There are reward offers for some of your bank’s partner stores when you use a credit card. Though this may sound promising, it often leads to overspending that can potentially end up in debt. It’s one of the biggest downfalls for most shoppers using credit cards. Though there are freebies, there’s also a high chance of you not being able to pay off your dues, which can increase the interest.
Though you think you might be able to save, you’ll end up spending more. Unless you’d have enough cash flow to pay off the card on a regular monthly basis, refrain from using it for unnecessary reasons. There are already stores that give their customers an option to go for a debit card payment instead.
You can Have Rewards Benefit from it
Same as with the fourth reason, only use the card If you have a regular cash flow. Doing so saves you from paying a 10% interest rate if you’d fail to keep up with the dues. If you intend to go after the rewards, which can sometimes be a good thing, then make sure that you’ll have enough amount of cash to actually pay for the item already. That way, once the due date knocks, you can pay it upfront without having to worry about the additional charges.
It is essential to keep in mind that these rewards points are often intended for clients who fail to pay off their balance. In doing so, the company earns more from the balance of the rewards cardholder. For those who are fond of reward points, however, you still have the option to receive those as they are made available on some banks.