Some people get very worried about credit cards and feel that they should not be using them when there are others that use them without any concerns at all. If you see a lot of people with no concerns you might think about whether it might be okay for you not to worry about using one either. There are pros and cons to using a credit card and it is worth understanding both before you decide whether having one is the right for you.
Advantages of credit cards
Most shops accept credit cards and they can be a convenient way to pay for things because you do not have to carry cash. You will also get interest free credit on the items that you have bought until you have to pay off the credit card. This means that you can always use the card to pay for things if you run out of money before you next get paid. The cards are also useful because they have insurance built in. This means that if you happen to buy a faulty product and the retailer will not reimburse you then the card issuer will. This can be especially useful if you are buying online when you cannot inspect the product before you buy it. They are also more secure than cash. If they get stolen or your card details get stolen, the card issuer will put a stop on the card and reimburse any stolen money. If you have cash stolen it is very unlikely that you will be able to ever get it back.
Disadvantages of credit cards
The main problem with credit cards is the cost of them. There is sometimes a charge for having a credit card, but most of them are free. However, you will have a limit on how long you can leave the card unpaid. Once you receive your monthly credit card statement you will be told the date that you need to repay it by. If you do not repay by this date you will have to pay interest on what you owe. This is no different to any other loan, although the rates can tend to be quite high. The difference with a credit card is that there is no repayment schedule. As long as you repay the minimum each month, which is effectively usually equivalent to the interest you can keep the loan as long as you wish. If you keep spending on the card and only repaying the minimum, you will end up paying interest on it forever. This can mean that it can be really expensive.
Is a credit card a good idea?
If you are going to use the card to take advantage of the free insurance, security and interest free credit then it is a great idea as long as you repay the balance in full each month. More than half of the people that have credit cards do this and find it works well for them. However, the other half only repay the minimum and then they will be paying interest on what they owe on the card all of the time.
You need to think whether you will have the self-discipline to take advantage of the great things the card has to offer and repay it in full each month. If you set up a direct debit to pay it off then it is more likely that you will be able to repay it all in full each month. However, there is always a risk that you might decide that you want to repay less so that you have the money for other things or that you decide not to set up the direct debit so that you can be more flexible with your repayments. This will enable you to spend a bit more money but it will mean that you will end up paying interest which will cost you money.
Some people will be happy having a card like this but there will be those that know they are taking a risk and that they may end up in debt that they cannot manage. You need to be really honest with yourself and make sure that you are sure that you will be responsible with the card. You will know what you are like when you are spending money and using credit and so you should have a good idea of whether it is wise to get a card. If you have ever had a card before then you can look back to how you found it and think about whether you think you will be responsible this time. If you really have no idea then be cautious. Try to start with a low credit limit so that you cannot spend too much and will be able to manage to repay it without too much difficulty.