Published: June 4, 2018 | Updated: December 12, 2019 | Posted by: Venus Zoleta | Credit Card
Tempted to apply for a credit card? Make sure you do it for good reasons.
Before signing up for a credit card, check your motivations first. Does one of these reasons to get a credit card resonate with you? If so, it might not be the best time yet to become a credit cardholder.
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One of the most enticing features of a credit card is its very low required minimum payments. Some banks charge only a minimum of 3% to 10% of what a credit cardholder actually owes.
Seems easy on the pocket, right? But thinking you’re ready to own a credit card just because you can afford the minimum amount due can set you up for a huge financial mistake. If you just pay the minimum amount due every month, you’ll be paying a higher interest over time. You should be thinking instead in terms of whether you can pay off the full balance every month.
Some credit cards come with certain perks or rewards that are so irresistible you want to grab them right away. Sign-up bonuses, in particular, attract people into getting a credit card.
Nothing wrong with wanting to take advantage of the perks—it’s actually a great way to maximize the use of a plastic card. But applying for a card just for this purpose doesn’t make sense—more so if you’ll rarely use the reward or it won’t actually benefit you in the long run.
Let’s say you’re considering a credit card because it offers awesome travel rewards. If you travel frequently, it’s easy to rack up points and redeem your rewards. But what if you travel only once a year? You won’t get to maximize the card that way.
Each time you go out with your friends, seeing them whip out their credit cards when paying at the counter makes you want to wish you had one, too.
Different people have different lifestyles and spending habits. Consider yours when deciding whether to get a plastic card or not. A credit card may work for your friend, but that doesn’t necessarily mean it’ll also work for your own situation.
Some people anticipate an upcoming financial setback, like a layoff or a big medical expense, so they look for ways to get them through a looming rough patch. Unfortunately, a credit card won’t save them in such circumstances.
Making ends meet is one of the worst reasons to get a credit card. Even if your monthly income qualifies for a credit card, it isn’t a good idea to get a new card if you’re already burdened with many bills and debts.
Thinking of opening a credit card account to get cash advances anytime you need to borrow money? Using a credit card’s cash advance feature is convenient yet very expensive—you’ll be charged as much as 5% of the withdrawn amount. Apart from the high interest rates, cash advance fees have no grace period, which means you have to pay off your balance immediately to avoid incurring debt.
When you need to borrow money, explore better options, like personal loans with lower interest rates of around 1%.
Credit cards make it easy for consumers to opt for the bank’s flexible monthly installment program or the “buy now, pay later” arrangement. This is why they’re often used to buy big-ticket items like appliances, furniture, gadgets, and luxury items.
If you want to make that big purchase with a credit card but aren’t sure if you can repay it later, you might want to put off your credit card application. It’s much safer to just save up and pay that item in cash rather than find yourself buried in debt.
You’ve already used up 90% of the available credit on your card, and you might be thinking of getting another card as a backup for emergencies. Guess what—getting an additional card will just put you in a financial mess.
Consider this: Would you lend money to someone with debt? Instead of applying for another credit card, avoid maxing out your existing card and work on paying down your balance.
Ever got a call from a sales agent who tells you that you’re pre-approved for a credit card? It can be flattering and tempting to get a new card after hearing that. But do you really need one right now?
The same goes for when a sales rep in the mall tries to persuade you into signing up for a card with great offers and giveaways.
You don’t need someone else to tell you that you need a credit card or if a certain card is perfect for you. They don’t know your budget, lifestyle, and needs—you do. So if you’re looking for the best credit card for you, do your own research and compare your options.
Credit cards are convenient and useful tools for cashless payments, especially during emergencies. If you use and manage it well, you can maximize the benefits that come with a credit card.
But before you get one, do a reality check on your financial status. Can you afford the credit card payments? Are you getting a card for the right reasons? Make sure you’ll be a responsible credit cardholder when you apply for a new card.