The misunderstanding in this world is that debt is always bad. Governments, corporations, small businesses, working individuals, even students all have DEBT and it is believed that DEBT will be the downfall of society. However debt is not itself the evil force behind recessions, repossessions, retrenches and credit crunches! Should you get a credit card given that it is essentially debt and must be bad?
BAD DEBT is the problem. Debt itself can be a wonderful tool when used effectively. However when used ineffectively, ‘good’ debt can quickly turn to ‘bad’ debt which can leave you in a nightmare situation. So before asking the "Should you get a credit card" question or choosing which credit card is suitable, make sure you keep the following in mind before applying.
SaveMoney Credit Card Reminders
1. Credit cards are not additional income streams so don't increase daily expenditure just because you can spend on credit.
2. Always borrow as little as possible and pay the debt off as quick as possible because the quicker you can repay, the cheaper it will be for you.
3. Beware of the Credit Card fees because If you fail to repay in full, you'll pay interest on the whole amount regardless of any payments made.
4. Avoid late payments as it may lose you any cheap interest rate deals, pay penalty fines and/or hurt your credit rating that may affect future credit card applications.
Should you get a Credit Card bearing in mind all these potential hazards?
So, after all that, should you get a credit card? As mentioned earlier, credit cards are not the root of the problem. In fact, if you are disciplined, credit cards have many benefits. It can help keep track of your monthly expenditure, push your monthly payments until after your salary gets paid, earn you rewards or even save you money if used correctly.
Much like lighting a match that has many positive uses such as lighting a candle or providing light for a short period of time, there is a reason why parents always tell children “do not play with fire.” This is because young kids do not know the extent of damage fire can cause in the wrong hands. Same applies for credit cards so keep in mind the following Save Money points.
SaveMoney’s Credit Card Top tips:
1. Best to pay off credit cards in full if you can stay within your budget!
2. When using credit cards with 0% purchases, ensure that you don't miss the minimum payment during the 0% period ;
- Set up a direct debit to pay the minimum repayment each month of your credit card balance. This way you avoid any late penalty fees or lose out of 0% interest cards.
- The minute you pay less, pay late or miss a payment, you lose the 0% bonus rate and get charged the usual high interest rate on this type of credit card.
3. For 0% easy repayment plans over 12 or 24 months for purchases such as mobile phones, home appliances etc, always meet the repayment each month ;
- Otherwise you will usually lose your 0% rate over the entire term of the repayment plan.
4. Apply for credit cards that can give you the most rewards from your spending habits ;
- If you spend a lot of your hard earned cash at certain stores, find the credit card that can give you the best return on your spending.
Not sure what you should apply for?
If you still don’t know where you should be looking, why don’t you take SaveMoney’s Credit Card quiz which will do its best to help recommend you a card:
Question 1
Will you be able to pay off your credit card in full every month?
NO
Go to Question 2 so we can try to minimize your interest payments to save you money.
YES
Congratulations, you have landed on cloud 9 of credit card choices. As you can pay off your credit card in full each month, you don’t have to worry about interest rates. Focus on the best card that rewards you best for your spending. For example, if you are a hardcore movie buff, then finding a credit card that gives you rewards at the Cinemas could be your ideal card. Browse through our Cashback credit cards as well as our reward credit card page.
Question 2
Will you clear all the debts from spending on the card at the end of the 0% period?
NO
Go to question 3
YES
Go for the longest new customer 0% rate for purchases available, giving you time during the 0% period to earn and save enough money to pay off the debts without any interest cost.
Question 3
Are you likely to make a disciplined effort to apply and change cards, on time, roughly every 3-6 months?
NO
Go to question 4
YES
Grab the longest new customer 0% rate for purchases available. Apply for a new credit card with the longest 0% Balance Transfer when the 0% interest period is nearly over (usually 3months or 6months) and transfer the remaining debt onto the Purchases Card.
Question 4
You need to spend using a credit card but unable to make full payments and not willing to apply for new cards every time the 0% period ends?
Your best option is to apply for the lowest interest rate credit card for purchases, and stay away from 0% credit cards. This is because after the 0% period, the interest rate will jump considerably higher than the lowest interest credit cards available out there.
Should you get a Credit Card?