Is all credit bad?

A lot of personal finance blogs and websites suggest that the use of credit is the worse thing that could happen to you. I don't agree. There is a place in life for easy credit cards.


Where?

Large purchases have additionally insurance cover if purchased on a credit card. Buying holidays on a credit card also gives you useful additional cover. You can certainly use your debit card to make the same payments but they don't have the associated benefits.

At my company this week we have been asked to opt in to certain benefits as part of our new terms and conditions. Several people have complained that they already get free travel insurance from their provider assuming that they use their card for a certain amount each year. Assuming that they repay in full before accruing interest then they have made a good saving.

Cash back cards give you the chance to accrue money or points free, from use of the card. This is especially useful if you were go to incur the cost anyway, for instance travelling for your job. It wont make you rich but every little helps.

When something goes really bad and you need financial assistance in a hurry. You may have an emergency fund but maybe its not enough. You may have an emergency fund but maybe you need to order something over the phone (car part?)and the card is the way to go.

When are bad? Are they ever bad or is it just what we do with them? If you have certain types of spending patterns then it is time to ask for help.

Drawing out cash - you are paying a ridiculous interest rate for this. Don't do it. Look at your finances. Consider an IVA.

Buy day to day items and not clearing the card at the end of the month. Buying everyday items on the card is fine but not if you then end of paying interest on your shopping. My mum buys all her shopping on the card because she gets cash back. At the end of each months she makes a single bank payment and incurs no interest, no problem.

Buying large items on the card to spread the cost, for example for Christmas or a family holiday, and not clearing it before the next cost comes around. This is the slippery slope. Seek help, make plans, spend less.

Credit cards are not bad but sometimes we are........

Comments

  1. I like credit cards myself because they are convenient for a lot of everyday things.

    It is paid off each month so I am likely not the type of customer they want.

    My card gives me travel insurance and airmiles and I am really happy with that.

    As you say, it is us that will determine if this tool would be beneficial or not!

    ReplyDelete

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