Credit cards are sometimes seen negatively because they can encourage people to spend money they don’t have. When you include the high-interest rate, it’s easy to fall into a financial bind and end up in life-altering debt. On the other hand, credit cards provide numerous advantages when used appropriately and can even assist people who are experiencing financial difficulties in improving their financial situation.
Here are 5 compelling reasons to apply for a credit card.
They establish a credit history for themselves.
You’re likely to have a poor credit score if you’ve never had credit before because you don’t have any evidence that you’re a responsible borrower. While a bad credit score can make getting your first credit card more difficult, numerous cards are intended specifically for first-time customers. They will have higher interest rates than other cards and a lower credit limit or the maximum amount of money you can spend. Once you have one of these cards, use it to purchase daily necessities such as food or gasoline. Make sure you pay it off in full as soon as possible. It would support if you had money set aside in your budget because you will be purchasing these items with cash. It is not ‘free’ money, so resist the temptation to spend it on other things.
Credit Cards Are Accepted Almost Everywhere
Credit cards are accepted as a form of payment almost everywhere globally. Although your card provider may levy an exchange fee, double-check before spending money abroad. There may be a minimum spend requirement when paying with a credit card, so keep that in mind.
Bonuses are available.
When you have the finest credit score, your credit card options expand. Many credit cards come with incentives that make routine purchases more enjoyable. These can range from points with a specific brand to a portion of your purchases as cash back and air miles that can be redeemed for free flights. If you have substantial outgoings that you generally pay for with money, such as commute costs or weekly food shopping, using a credit card will allow you to get something for free. If you do not pay the balance in full every month, the benefits may not be worth it because the interest will wipe out the gain.
They assist with budgeting.
If you’ve ever felt the money was gone from your wallet but couldn’t remember what you spent it on, a credit card will fix your problem. Each purchase will be itemized and available for you to inspect. It’s also a good approach to assess your budget because you could be surprised at how much money you spend on non-essentials. Aside from that, credit cards can be used as an interest-free three-week loan because you have about 25 days after receiving your statement for the previous month’s spending to make a payment before being charged interest.
There are fewer fees for them.
Most credit cards are free to apply for and have, though they charge interest on delinquent balances. They don’t have overdraft fees, and the majority won’t allow you to go above the agreed-upon amount. Annual fees, often known as membership fees, are charged by some credit cards, but they are usually associated with cards that give a greater level of benefits.
They serve as a deterrent to fraud.
It’s simple to notify your credit card company if your card is lost or stolen, and they’ll put a hold on it. Even if someone else has already spent on your card, you are unlikely to lose much money because money is not removed from credit cards instantly. The credit card issuer may take some time to investigate and discover fraudulent activities. Still, unlike with a debit card, you will not be out of pocket during this time because you have not yet paid for that statement period.
They lower the cost of large purchases.
Getting a 0% purchase credit card is perfect for paying in installments over a prolonged time if you have planned and budgeted for an expensive purchase. In this situation, write down when the promotional balance period finishes (usually around 18 months) and divide the total spent by those months. If you merely pay the bare minimum each month, you’ll still owe money when the normal rate kicks in, and you’ll have to start paying interest. This is one of the best common pitfalls that prudent borrowers fall into.
They allow you to transfer your balances.
If you made a substantial purchase during a 0% purchase promotion and could not pay it off in full, a 0% balance transfer credit card can help you avoid paying interest on the residual debt. Although you will not be charged interest during the promotional period, you will be charged a one-time transfer fee with most of these cards. When you apply for a credit card, this will be discussed in detail. Debt consolidation can also be accomplished through balance transfers. If you have several credit cards and pay interest on their balances, consolidating them all onto one card simplifies payments.
Purchase Protection Is Included
One of the most reassuring aspects of getting a credit card is that, under Section 75 of the Consumer Credit Act 1974, your card issuer is jointly liable if the firm you bought from breaks the contract they made with you. Suppose you discover that your item is damaged, of low quality, or malfunctioning, and you cannot obtain a replacement or a refund from the retailer or trader. In that situation, your credit card provider will initiate a chargeback for transactions above £100. It also includes services and businesses that go out of business before getting what you paid for.
They can provide insurance.
Even if you didn’t buy what you’re claiming for with the card, certain premium credit cards might offer electronics or travel insurance. Some even provide breakdown assistance for your vehicle. Rather than paying for these insurances separately, investigate if having a card with a membership fee that delivers a higher level of incentives, including insurance, is more cost-effective.