Many people have credit cards, but some people use them more often than others. Some people worry a bit about using their credit card and others do not worry. But should we be worried or should we be using as much as possible?
Advantages of a Credit Card
Having a credit card means that you can buy things right away and can delay paying for them. You will be able to pay in full for the items when the statement arrives or you can just pay a minimum amount and borrow the money for a while. You can keep the loan for as long as you want which means that there is no pressure to repay it quickly – you will just have to repay a small minimum amount every month.
Some credit cards have a cashback feature. This means that for everything you buy with the card, you will get cashback on that item. The percentage of cashback that you get will be really small though, but it can still be worth doing as you can get some money off your next credit card bill.
Some businesses these days will only accept payment by credit card, partly for hygiene reasons and partly for ease of processing payments and so it could be very useful to have a card to buy from these.
If you buy things online then there is always a risk that you will never receive the item or not get what you were expecting. Although there is a law that you have to be able to send items back for a refund in the UK, even if it is not faulty, this rule does not extend to foreign sellers. You may also find that the seller will just not behave in a reputable way. If you buy with a credit card then you have some come back through the credit card company. If you have tried already and had no success to get a refund, then they will be able to credit the money back to the card and you will not lose out. It may take some time but it can offer peace of mind when you are purchasing things.
Disadvantages of a Credit Card
If you do not repay the full balance of your credit card you will have to pay interest on it. The card issuer will let you know how much the interest is going to be so you will not have a nasty surprise. Interest rates can be quite high compared to other loans so it is worth checking them. You should compare the rates between different cards, particularly if you know you will not pay off the full balance each month, so that you can make sure that you are paying more than you have to.
The cashback feature can make the card more expensive. Many cards which offer this do have higher interest rates. You will therefore have to calculate whether you think that it is worth it. If you are very confident that you will never have outstanding debt as you will always pay the card off in full, then the rate will not be important, but if you know that it is likely or are not sure, then it is better to look for a card with a better rate.
The cashback feature is also risky because it could be that you use it to justify spending a lot of money. You might decide that you want to avoid this risk and not get a cashback card, but you may feel that you will just use the card as normal and it will not impact your shopping habits but just give you some extra cashback then it will suit you.
The convenience and security of a card can potentially lead to you using it more often. While this can be fine, you need to think about whether you are staying in control of your card use. As you do not handle cash, you will find it harder to keep track of what you are buying and you may even not really bother to look at prices. You might therefore spend more than you can afford and this could lead to problems when it comes to paying off the card.