First Time Credit Card User: Is it a good or bad idea to have a credit card?

Many people, like myself, wonder if taking out a Credit card is a good idea or a bad idea. As a first time credit card user i’ll be sharing the pros and cons.

Let us start by defining what a credit card is, and what is used for. One of the definitions I found whilst doing my research is that a credit card is defined as a line of credit that can be used to borrow money to make purchases, transfer balances and get cash advances, with the agreement that you’ll pay back the money borrowed — plus any interest you owe on it — at a later stage.

Are Credit cards good or bad?

When it’s used responsibly, a credit card can help you build a good credit history. The unfortunate part is that you will need to have a credit rating first in order to get a credit card, which may be difficult if you’ve never applied for credit before.

If it’s your first time applying for credit, ask for a lower limit. Most banks give their clients the option to use their credit card facility without them having to pay interest for the first few weeks.

Advantages for a first time credit card user:

As a mother of four boys, I frequently find myself wanting to be educated on managing my credit. With the amount of technology and apps exposed to us, it becomes difficult to choose the right strategy for me. With the help of Money Unscripted, I am going to use the tools available to me, to increase my credit score and manage my budget.

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I got myself a First National Bank credit card, my main reason is to position myself correctly for when I want to buy my first home. The current amount the bank is willing to lend me does not qualify for the house I would want to buy in the future, considering that I am currently still paying for the car I bought in 2019.

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Let us discuss the advantages of having a credit card:

Buy Now Pay Later:

When one has emergencies, you don’t need to break fixed deposits or take expensive personal loans. You can simply pay with your credit card. You could pay it off before earning interest on the amount. However, don’t rely on your credit cards to much. It’s good to have an emergency fund to cover unexpected expenses.

Remember, credit cards offer 55 days interest-free grace period, that is the maximum interest-free period you can get, and it all depends on how you use your card.

Safety:

In case of fraud or theft, the debit card money is immediately debited from your account. Then you are the one following up with the bank for assistance. However, for a credit card, money will be deducted after a month, so you can block the transaction while the bank does the investigation.

Reward Points:

First National bank benefits in terms of rewards such as eBuCKS, one can redeem your reward points for awesome gifts and merchandise.

Manage good credit history:

Credit card can also be a great way of consolidating your debt. Instead of having different store accounts, you can pay off all your accounts using your credit card, meaning you consolidate your debt onto one card and in one account – with one monthly statement and one interest rate.

Disadvantages of a credit card:

Overspending:

Since you don’t have to pay immediately, you may spend more than you can afford. Buying things, you do not need. You will need to learn to live within your means.

Minimum Payback:

Credit card companies have a minimum amount that can be paid off the total bill, and the rest you can pay later. Falling into the overspending trap and paying high interest rate. Best option is to pay more than the minimum amount that is required.

High-Interest Rate:

When you fail to pay your bill, you end up paying a lot of money as the interest rate are high. A credit card is a double edged sword. It’s nice to have but requires a lot in return, i.e a high-interest rate.

Hidden charges of credit cards:

Nothing is free. That goes for credit cards as well. There are charges associated, which will be activated in specific situations. Familaries yourself with the terms and conditions of your contract with the credit card provider.

Now that we have discussed the advantages and disadvantages of having a credit card. I now know what to expect and how to use my credit card to my advantage.

I will use my credit card to pay all my monthly utilities, wait a few weeks and pay the money back into my credit card. That way my salary will stay longer in my account. As a first time credit card user I will be sharing my journey with you. Are you willing to take the first step with me?

In conclusion, credit cards can make or break one. Use them wisely.