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Why You Should Not be Afraid Of Getting A Credit Card
Credit cards are often painted unfairly in a bad light as a financial tool that has consumers saddled with debt, but it need not be the case. Credit cards have plenty of good qualities that merit your consideration. Once you understand all of the advantages and disadvantages and realise how to effectively leverage your use of a credit card it will become one of your most powerful financial tools.
If you’re on the fence about getting a credit card or would like a crash course in why a credit card could be a catalyst for improving your financial future then check out these ten reasons why you should consider applying for a credit card. Is it time to get a credit card?
1. A credit card helps you build a credit history
Eventually, we all need to apply for a bond or large loan to finance things like purchasing a house, car or paying for your education or your kids' education. When a financial institute evaluates how much money they’re willing to give you and the repayment terms they tend to look favourably on those with a consistent and active credit record.
Without a credit history, it can be more difficult to get loans (including good loans such as student loans or a mortgage), secure insurance and this can have a knock-on effect on your plans and your future. Holding a credit card and making timely payments is one of the easiest ways that you can build your credit history. Charging small amounts and paying them off is a great way to establish a credit history.
2. A credit card can be an Emergency source of funds
Life is full of unexpected expenses, and you never know when you need to have a large sum of money to spare to salvage a situation. Having savings or an emergency fund is always the preferred option, but if you don't have a kitty prepared for unforeseen expenses, then a credit card could be a lifesaver. A credit card helps you keep your expenses within your immediate control so to speak, and you can avoid racking up debt at unfavourable rates like having to go through the pain of a short term loan or taking the risk of a payday loan.
3. Earn rewards with your credit card
Banks often encourage their customers to make use of their credit card service with many credit cards having rewards programs attached to them. Credit card owners can earn rewards including cash back, airline miles, discounts, rebates, gift cards, and many others. These rewards are designed to get customers used to using the cards or spending more than they would otherwise but when used correctly, these rewards points can earn you a lot of money.
South African credit card based reward programs include:
- FNB - eBucks
- Standard Bank - UCount
- Absa - Absa Rewards
- Nedbank - Greenbacks
5. Safety and convenience
It's never advisable to carry large amounts of cash with you, but this is unavoidable when you want to make large purchases like furniture or electronics. If you lose it or If it’s stolen, it’s gone and not to mention the severe anxiety you face carrying around large sums of money. Credit cards are small, convenient, and carry better consumer protections like fraud and theft protection, if stolen they can be cancelled relatively quickly even if the thief has the pin to your card.
Another convenience credit cards provide when you travel and need to deal with forex. While you can exchange a small sum of cash for carrying with you for expenses on your trip, a credit card will allow you quick access to that nations native currency, I won’t need to exchange should you need to make a purchase or require additional funds.
6. Use your credit card as a budgeting tools
Keeping track of your spending when you use cash in combination with your debit card can make it complicated, and it’s up to you to keep a log of your expenses and create a monthly budget. By using your credit card to pay for the majority or all of your costs, you now have an instant record of all your transactions. Having a record will make it easier for you to get a quick overview of your spending and encourage you to keep a watchful eye on the money you spend. If you need additional support, you can also set your limit with your credit provider/bank to help you curb your spending.
Give yourself some credit
While there are temptations and the risks of misuse with a credit card but like any financial tool, it is only as effective when understood and used responsibly. When used at discretion a credit card can be an incredible tool that can make your life a lot easier and help you build towards a favourable financial position.
Tell us your credit score story
Have you started to try and improve your credit score recently? How is it going? Do you have any tips you feel should be added to the list? Share it with us in the comments and let's help South Africans save even more.
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If you enjoyed this post and have the time to spend diving deeper down the rabbit hole, then we suggest you check out the following posts about improving your finances in South Africa.
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- How South Africans Can Save Money Each Month
- How To Check Your Credit Score In South Africa