Credit Cards: Good Or Bad For Your Family Finances?
I’m sure most of you have heard of credit cards and have a vague understanding of what they are and what they do. I’m also sure that a lot of you have heard mixed things about them. Some people claim that credit cards are awful and you should stay away from them at all costs or risk ending up in loads of debt. Others claim they’re very helpful and should be an essential part of your family’s financial plan.
What we’re going to look at today is which of these opinions is the right one. Are credit cards good or bad for your finances?
Are Credit Cards Good or Bad?
The main reason people think credit cards are bad is that they’ve been linked to debt. There’s no denying that a credit card can put you in debt, but it’s more to do with the way you use the card rather than the card itself.
If you use your credit card correctly, it won’t put you in debt, and you can actually find great uses for it. So, no, credit cards aren’t bad, they’re just misused quite a bit!
How Do You Use A Credit Card To See The Benefits?
Of course, the main question is how you use a credit card to benefit from it. Well, it all starts with choosing the right card. You need to look for a card that has low-interest rates, minimum fees, no hidden costs, and also provides good rewards. There are loads of places like comparison site GoBear where you can look at all the different credit card providers and what they offer. Pick the right one for you, and you’ll have a card that provides you with some additional benefits and doesn’t restrict you with loads of fees.
Next, you need to think about your credit limit. This is the maximum amount you’re allowed to spend on your card. Ideally, you should try and keep this low. Some companies will offer you a really high limit, don’t be tempted by it! Keep it fairly low, so you will never end up going overboard, which can lead to debt.
The biggest piece of advice is to always pay your bill in full every month. This is how you avoid paying interest rates on your credit card bill! Companies will offer you a choice whether you pay the bill in full, or you pay the minimum fee. If you pay the minimum fee, then the extra money gets added on to your next bill plus interest. Paying your bill in full simply means you pay for what you used. So, if you only spent £100 on your card but you have a limit of £1000, you will only pay for that £100 you used, not the whole credit limit.
So, if used responsibly, a credit card can help you pay for expensive items when you need some extra help. It also provides you with insurance on all purchases you make with the card. To make things even better, you can get rewards such as vouchers, points, or even cash back through using your card. All in all, they’re very good for your finances when used correctly.