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Credit cards can be a controversial prospect – for some people, they’re an essential part of their life and the way they spend, for others they’re nothing but a passport to bad debt. What’s the truth about credit cards, do you need one, and how can you make the best of one?
To answer this it’s important to know what the unique selling point of a credit card is, and that is, of course, the fact that you can make a purchase now and pay for it later.
What use is this? There are several benefits. The first is that it can make it easier to defer a payment on a larger purchase to make it more comfortable for you to afford. The second is that it can help you if you run into a financial bad patch by still allowing you to buy essentials.
So having a credit card is a good idea, but what is the best way to actually use it? Firstly make sure you are familiar with the interest rates and charges associated with your card. This will help you to better understand what it will cost you to use the card when you make purchases.
Keeping track of your purchases with the card is also essential, allowing you to measure it against your financial capabilities. In short – don’t buy anything with the card you know or suspect you won’t be able to pay off. This is where the bad debt spiral always begins.
Getting a credit card and making “good” transactions with it, namely paying your bill on time, is actually a good way to build your credit.
These are just some of the reasons a credit card can make sense.