Credit cards can seem like a godsend. One swipe for your purchases, and you won’t have to worry about paying it until the end of the month. Being a credit card user, it allows you to delay your payments made usually up to 52 days of the interest-free period. Having a credit card also significantly reduces the amount of cash you carry in your wallet. While it is definitely useful, all it takes is a mistake in handling your purchases before it becomes ab-useful. Hurhurhur, get it? Not everyone should use it, to be honest. In this article, fundMyLife describes three kinds of people who should use credit cards, and two kinds that definitely shouldn’t.
People who should use credit cards
#1 You make expensive purchases
One advantage of having a credit card is that you don’t need to lug huge wads of cash whenever you make expensive purchases. If you find yourself living the Crazy Rich Asian lifestyle, you’d definitely need a card to handle your purchases. However, there’s also another reason why you should consider credit cards for your big ticket purchases – 0% installment plans. It lets you spread out your large purchases over a period of time, assuming you’ve the discipline to repay them regularly.
Caveats to note: no points or cashback (usually), upfront processing fees, penalties for card cancellation and early repayment, reduction in monthly credit limit during installments. So be sure to read the fine-print and ask a lot of questions.
#2 You buy lots of things for your friends
Are you the one friend who buys a lot of things for your friends? You’re probably the go-to person, whom your friends rely on. When it comes to group purchases, you’re the first point of contact. With cashback and/or points, you’ll benefit the most from helping your friends purchase things. After your friends repay you, you still get the benefits of the extra cashback and points. It’s a win-win situation for both parties. You’d definitely be one of those people who should use credit cards.
#3 You travel a lot
Find yourself travelling often? You wouldn’t go too wrongly with a travel credit card with no foreign transaction fees. On top of the convenience, there’s also the security factor as well. Instead of lugging wads of cash when you go overseas, carrying a travel credit card makes your life simpler. Of course, it doesn’t mean you should eschew cold hard cash completely. You can bring less of it if you bring your travel credit card as well.
People who should NOT use credit cards
#1 You’re terrible at managing things on time
First things first – ask yourself if you’re a punctual person. For example, do you pay your bills on time? If you find yourself regularly not paying your bills, the odds are that you won’t be able to pay your credit cards debts on time. Interest rates of your credit card ranges between 18-28% per annum – that is very hefty. If you continuously forget to pay your credit card debt, it will snowball quickly leaving you deeper in debt.
#2 You’re already in debt
As mentioned, the interest rate of credit cards is very high. You should consider credit cards as a mode of payment, and not a line of credit. As such, you shouldn’t be getting a new credit card because you’re in debt. Furthermore, getting more cards to cope with expenses is dangerous. Psychologically, it’s not painful to have $100 across ten card, even though the total debt is $1,000. With each card having its own terms and conditions, you’d have a hard time keeping up with all of them.
Connect with fundMyLife financial advisers today!
We hope you belong to the groups of people who should use credit cards, and not the last two. Make sure your cashflow and lifestyle has a qualified second opinion by a financial adviser!
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