Credit Cards: To Be or Not to Be?

Whether or not you should have a credit card depends very much on your attitude to money and paying off debt. If you have a healthy attitude to both, a credit card can be a great thing.

Here are the pros and cons of having a credit card.

PROS

Ease of Shopping

As long as you adhere to paying off your credit card on time, you will always have access to thousands of dollars in credit, helping you purchase items you may not be able to purchase otherwise.

Reward Points

Most credit cards are now linked to frequent-flyer programs or general reward programs. Although it does tend to take a very long time to earn sufficient points to travel or buy reward items, you will eventually get there. It's a great way to take your kids or yourself on an unexpected holiday. Compare credit cards to determine which ones offer the best rewards program for you.

Safety

Carrying lots of cash around can be a real issue in today's high-theft environment. A credit card is a far safer option, particularly if you are travelling. But even locally, should you lose your credit card, you can quickly report it to your bank and your credit card will be cancelled immediately. Any purchases made without your permission will usually be re-credited to your account.

CONS

There are definitely downsides to having a credit card. Here are a few points to take into consideration.

High Interest Rates

All credit cards charge very high daily interest rates on purchases you make. If you do not pay your credit card off as required by your bank, you may find yourself paying hundreds of dollars in interest per month. Make sure you pay off your credit card by the due date.

Debt Build Up

It is essential for you to pay off your debts in full each month. If you only pay off a small amount each month you will find that your debt will continue to build up, and the stress of paying it off will compound each month along with your interest charges.

Loss of Credit Rating

If you are not particularly responsible with money and have issues in paying on time, you could not only end up with a significant debt, but also a negative credit rating. Be aware that what you do today will affect your future credit rating, so give some consideration to your account conduct.

Cash advances

Although it is possible to withdraw cash from your credit card, the fees and charges are immediate, expensive and the interest is higher than the purchase interest rate. Generally you will be paying interest on a daily basis until the full balance on the card is paid off.

If you are still keen to use a credit card, then ensure you chose the right one for you by comparing cards at www.ratecity.com.au and www.cannex.com.au where all the research has been done for you.