Do you really need a Credit Card?

So its time now that you have started thinking about taking a credit card? The very first thing to ask yourself is whether it’s really the right sort of borrowing tool that you need or can you be better off without it.

So first things first: A credit card is a convenient short-term way to borrow money, often offering a period of interest free credit. But if you’re considering about borrowing money for more than a few months then you might want to consider a personal loan.

Remember that you have to pay back what you borrow. It is equally true with the credit cards as well. You cannot just use your credit card as per your wish and forget it. You have the obligation to repay that money back to the credit card company. If you repay that money within the specified time limit (usually the next due date), then you don’t have to pay any interest on that. However, if you delay the payment, then you will have to repay a lot more than what you borrowed. It will involve a very heavy interest, and also late fee and penalty. All these charges may be subject to taxes like service tax and others.

Think about what you need credit for: is it a luxury or a necessity? Credit is not free money: the golden rule is that if you can’t afford to make repayments on your debt then you should not be borrowing at all.

Used sensibly, credit cards offer many benefits, but used irresponsibly could pose a lot of risks:

Advantages and risks of using a credit card:

Advantages:
- Free, short-term credit as long as you always pay your balance in full by the due date shown on your credit card statement.
- A safe and convenient way to pay for goods and services, particularly over the Internet, by phone or by mail order, from businesses both in the UK and abroad.
- Protection against fraud — if you are the innocent victim of fraud you will not be expected to pay if a criminal uses your card.
- Incentives for using a card such as loyalty points and cash back, or payments to support a charity.
- A truly global currency, as credit cards are accepted in virtually every country around the world.
- Perhaps the most flexible and convenient way of borrowing money in the short term.

Risks:
- May lead to unplanned levels of debt.
- Incur heavy charges if you make late payments, miss them altogether or go over your credit limit.
- Damage your credit rating if you continually make late payments or miss them altogether.
- Cost you more and take you longer to pay off than the alternatives, particularly if you only ever make the minimum repayment.
- If you have more cards than you need it could make it difficult to manage your finances.