In this brief blog, we are going to answer the question “ should I get a credit card  “

Many people always wonder if they need a credit card and if they should get one. The reality is that a credit card could be a good part of the financial tools you need for an all-round good financial wellbeing but ensuring you know why you need a credit card will allow you to get the best credit card for you.

What is a credit card?

A credit card is a short term credit facility. It provides you with a credit limit which is the maximum amount you are allowed to spend on the credit card and an APR which is the interest rate you are charged when you carry your credit card balance from one month to the other.

Credit cards come with other fees such as  foreign transaction fees, money transfer fees etc

When considering if you should get a credit card or not you should be aware of these fees to ensure you get a credit card which suits you.

Types of credit cards?

When considering if you should get a credit card you should know the different credit card options that you have out there.

Some of the credit cards include

Purchase credit cards

Student credit cards

Balance transfer credit cards

Money transfer credit cards

Cashback credit cards

Reward credit cards

Secure credit cards

Platinum credit cards

Travel credit cards

Do I need a credit card to build credit?

No, you don’t need a credit card to build credit you can also build credit by doing other things such as paying your bills on time, registering on the electoral roll, opening a bank account for a long period of time etc but a credit card can help you build credit when you make your monthly repayments in full and on time each month.

Is it a good idea to get a credit card?

Yes, it is a good idea to get a credit card if you can afford to make the monthly repayments on your credit card each month. Credit cards can be a good idea as they can help you with financial emergencies, have legal cover and provide perks such as cashback and discounts.

Do you really need a credit card?

You don’t really need a credit card but a credit card can offer you so many benefits that you may find having one rather not having one is a better option.

Why you should never get a credit card?

You should never get a credit card if any of the below applies to you

You don’t want to pay interest on purchases

You don’t have enough money to repay your minimum payment each month

You aren’t financially disciplined

You think you will overspend

You have too many debts already

You already have lots of credit cards

You don’t understand credit cards

Why Should I Get a Credit Card?

There are many reasons why you should get a credit card. One of the important reasons is because it is just a good financial tool to have as part of your financial wellbeing. 

Credit cards also offer you short term access to cash for financial emergencies. Credit cards also offer you consumer protection on purchases from between £100 and £30,000.   Credit cards can also help you build your credit score if you have no credit history or bad credit.

This generation is more likely to shun credit cards according to research but credit cards can be seen as a 0% credit facility if used the right way. This means you may never pay any interest on your credit card if you use it the right way.

If you pay off your credit card in full at the end of a billing cycle, which is typically 30 days, you won’t have to pay interest.

When Should I Get a Credit Card?

You should only get a credit card when you are sure that if you borrowed from the credit card you will be able to pay back any balance you may have borrowed in full. You can work this out by simply looking at how much your disposable income is every month( the amount of money you have leftover after all your monthly expenses). 

If this amount is more or the same as your credit limit then you should be able to pay back your credit card every month. if it isn’t then you should see if you can afford to pay back your minimum payment every month. 

If you can afford to do this then maybe you should get a credit card but remember paying back only the minimum payment on your credit card each month will mean that you are carrying a credit card balance from one month to the other which you are being charged interest on.

Credit card APR is charged on compound interest and this means that you could easily find yourself having credit card debt.

Interest on credit cards is also compounded and this means you can find yourself

Should I get a credit card?

So you have been thinking to yourself “should I get a credit card”, well the answer really boils down to your need for a credit card.

Below we have outlined a few reasons why you may need a credit card. If you have any of these reasons or if any of these reasons sound like something you may experience in the future then you should get a credit card.

Financial emergencies

Financial emergencies are one of the major reasons why people will often think to themselves “should I get a credit card”. This is because after experiencing a  financial emergency which has cost you so much money due to the fact that you didn’t have access to short term credit which you could borrow immediately at a fair rate. 

A credit card provides you ongoing access to short term capital which you may need at a moments notice at an APR which you may find reasonable in comparison to other short term credit facilities such as payday loans.

If you think you should get a credit card because you have had financial emergencies in the past then you may want to find a credit card which will provide you sufficient amount of capital which you will be happy to borrow and at a rate which you will be willing to borrow at. You may be able to find 0% purchase credit cards for this or money transfer credit cards with competitive rates.

If you have bad credit

If you have bad credit such as bankruptcy, county court judgements, Individual voluntary arrangements, mortgage defaults, missed payments, late payments then you may need a credit builder credit card which can help you build your credit score as you use your credit card and make your monthly credit card repayments in full each month.

If you think you should get a credit builder card to rebuild your credit score and history then you should ensure that the credit card you get has an affordable APR. 

Credit builder credit cards will usually not have a high credit limit but their APRs will usually be much higher than other credit cards. You should avoid carrying a balance on a credit builder card as with credit cards interest is compounded and this means you can easily find your self in credit card debt.

If you have bills

If you find that you end up needing extra funds before payday to cover bills regularly then you may want to get a credit card which you can borrow from to cover some bills before your payday comes. You can then pay your credit card back as soon as possible to ensure you are not paying any interest on the money you have borrowed.

If you want perks

If you do a lot of shopping and spend a lot of money with your debit card then you may want to consider getting a credit card which offers you rewards such as cashback or discounts from particular brands. These credit cards are more commonly known as reward credit cards.

If you think you should get a reward credit card then you must shop for the best reward credit card with a good APR. Reward credit cards are known to have very high APRs.

Most reward credit cards also insist that you clear the balance of the card in full each month if not access to the rewards and perks will cease.

If you want the consumer protection

If you spend a lot on your debit card and you are buying from third-party platforms such as Paypal, gumtree or eBay then you may want to use a credit card as purchases of between £100 and £30,000 made on credit cards come with consumer protection listed in section 75 of the consumer credit act.

If anything goes wrong with your purchase you can report this to the credit card company who will look after you.

So imagine you have booked a holiday and you get to the airport and the flight you booked from the travel agent suddenly doesn’t exist or the hotel you booked doesn’t exist then you are able to get a refund from your credit card company as soon as you report the issue.

In fact, you don’t even need to use your credit card to do the whole purchase you just need to use your credit card for a bit of the total purchase price and you will be covered for the whole purchase price.

If you want to borrow

If you want to borrow some money then you may find that a credit card could potentially be a better option than a  similar-sized loan. If you want to pay for an expensive item then using a credit card to pay for this item then repaying your credit card each month could be a good option. 

If you want to pay off debt

If you have credit card debt or any other debt then you may be able to use a balance transfer credit card and pay off your credit card debt. There are many 0% balance transfer credit cards out there which will allow you to pay off your credit card debt with a 0% credit facility.

This is, of course, a much cheaper alternative to paying off your debt at its current interest rate but you must ensure you pay off your balance transfer credit card as soon as possible as once the 0% balance transfer credit card period is over you could find that the rate charged on the 0% balance transfer credit card is much higher.

If you think you should get a balance transfer credit card then be sure you know if it has a 0% APR period and ensure you know how long this period is.

If you want to go on a holiday

If you are considering going on a holiday then some credit cards may offer much more than most debit cards as they are designed for those looking to travel and spend in foreign currency, These cards are commonly known as travel credit cards and they don’t have any fees for using them abroad. Most of these credit cards will also have good exchange rates but these exchange rates will not be as competitive as you may be able to find on the open market.  These credit cards may still charge you for withdrawing money at the ATM so ensure you have enough funds before setting off and travelling.

We hope you have enjoyed this guide which focuses on the question “ should I get a credit card “. If you think you should get a credit card then you must ensure you check a credit card comparison service to ensure you get the best credit card.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.