3 signs you’re ready for a credit card.
When’s the right time to set yourself up with a credit card? It can be a difficult question to answer, particularly if you’ve never had any experience with credit before. To help you identify whether you’re ready, consider these three common factors.
1. You have a steady income.
First things first, in order to make the most of a credit card you’ll need to be able to meet each month’s repayments. While this can vary depending on how much you spend, it’s a good idea to make sure your card’s full limit can be easily covered by your income. That way, you’re less likely to worry about unpaid balances rolling over from month to month, accruing additional interest and putting you into debt.
As part of this, you’ll want to consider what the interest-free period of your credit card will be. This is the period of time where you can pay off what you’ve spent without having to worry about interest, so the longer your card’s interest-free period, the further you’ll be able to stretch your income.
2. You’re debt free.
Credit cards can be a great way to streamline your monthly expenses into simple monthly repayments, but before doing so, check you’re able to absorb the total cost. If you’re currently paying off debts (such as a car loan) it may be better to wait until you’re largely debt-free before picking up a credit card. That way, you won’t have to stress about multiple payments per month, which can put a real strain on your finances if you rack up too many different debts.
Of course, there are exceptions to this, notably mortgages, which have a longer repayment period.
3. You understand credit.
Last but certainly not least, it’s important to understand how credit works.
In essence, credit refers to a set amount of money which you’re provided with to make purchases without having to spend your own money. At the end of the interest-free period, whatever you’ve spent needs to be repaid in full, otherwise the amount owed will increase based on your interest rate. It’s important to remember that whatever you purchase will still need to be paid for however a credit card simply delays when you need to use your money.
If you don’t feel as though you’re fully prepared for the responsibilities of a credit card, there are other options available. The most obvious of these is a debit card, which offers all the same functionality as a credit card (such as online purchases), but without the ability to spend money you don’t have.
To find out more about debit and credit card options available, get in touch with the Beyond Bank team today.