Credit cards are a convenient form of credit and often provide an edge over other forms of payment. They save you from carrying around large amounts of cash and allow you to easily purchase products and services online, over the phone and even on your travels. On the flip side, there are times when cards usage should be avoided to ensure unnecessary interest payments do not get out of control. In this article we will cover when is the right time to use a credit card and also situations where credit card usage should be avoided.
So when is the right time to use plastic?
Paying for goods and services online is certainly much easier with the use of a card but better still; some credit cards will even help protect you. When purchasing online, you can obtain product protection and extended warranties with certain credit cards. This is great peace of mind, especially in a world where many people are still developing trust in regards to making purchases online.
Travel is another great example for the right time to use a credit card. Imagine you are tired from a long haul journey, you’re carting a heavy suitcase around, your kids are hungry and the map you were given is about 10 years out of date – you’re lost in a foreign city. The last thing you want to be worrying about is dealing with a foreign currency to book your hotel room. Both MasterCard and Visa are global brands and recognised in most countries and make life a lot easier when travelling abroad.
Emergencies – let’s face it, we all have them and they always seem to crop up at the most unfortunate of times. Your hot water system blows up, your car tyres need urgently replacing, the garden fence blows down and your insurance policy does not cover it. These things do happen and it’s comforting to know that with a credit card, you won’t be left stranded until your next pay day. When the emergency is over and you’ve found your feet again, try to pay off your credit card as soon as possible to avoid excessive interest payments – or at least switch to a low interest rate card.
When not to use a credit card
Credit cards are a great convenience in our everyday lives but it’s important to use them wisely so they do not become a problem or source of worry. Some situations, as mentioned above, are unavoidable but where possible we have listed situations where you should ideally opt for an alternative payment option.
The biggest trap to avoid is withdrawing cash at ATMs. Most cash machines will let you draw out cash using your card but this can lead to disaster. Cash withdrawals will attract a fee of a small percentage of the amount you withdraw and advances are also usually charged at a much higher rate of interest than purchases. If this is your absolute last resort, tread with care. The best possible scenario is always to withdraw cash from a debit or savings account where the money is already yours.
Impulse spending – most of us are guilty of this and often live to regret it or hasty decision. Often what seemed like a good idea at the time can end up costing you in interest payments so think twice before committing to a purchase. Sleep on it over night or even leave your plastic at home if you are going shopping without a specific purchase in mind.
Paying your bills with a credit card is often easier than physically going to the post office, but it’s only a good idea if you are 100% sure you can pay your bills off in full the following month. If you are using your card to pay bills because you can’t afford to pay by other means, now is a good time to seriously look at your personal financial situation and seek help.
Finally, don’t pay off other debt using your credit cards. Credit cards are not the cheapest form of borrowing and unless you are looking at consolidating debt by transferring to another credit card provider on a 0% balance offer or low interest card, you will find yourself in trouble. If you need to borrow a substantial sum of money, a loan may be a cheaper option.
Credit card usage really comes down to common sense and your own individual circumstances. Try to keep borrowing to a minimum, keep a level head and remember that when used wisely, credit cards are your friend.