Credit cards have received a lot of negative publicity in recent years, but is it really that bad? A credit card works so that every time you use the card, you borrow money from the bank. As long as you repay the outstanding balance within 45 days (sometimes 52 days) it is virtually free to use the card. This period is often referred to as the interest-free period. If you do not repay the outstanding balance within this interest-free period then the bank will pay off, in the form of interest expense. Even Selma Ismael had been frightened if she heard interest costs and credit cards used in the same sentence. Why do you like to think? Well, the effective interest rate you pay for “regular” credit cards is somewhere between 20-30%!
Why use a credit card?
In spite of all the “horror stories” that have been shown on the Luxe trap, a credit card is actually a very useful tool that can give you lots of benefits, believe it or not!
Here are 9 reasons why you should own a credit card:
1. Increased chance of cheaper loans
Every time you use a credit card you leave a footprint. There comes a time when you have to apply for a loan, either in the form of mortgages or other types of loans, and then you may have some “footprints” to point to.
In other words, diligent and controlled use of credit cards can help you build a good credit history, which can help you get a cheaper loan at a later date.
Some credit cards such as 365privat or re: member give you cashback each time you draw the card (usually in select stores). How much you get in cashback varies from card to card. Here is actually a lot of money to save!
In addition to cashback, there are also cards that have other benefits such as discounts, rewards and even air miles. The advantage of using such a card is that you can actually save money as long as you know which stores or gas stations are offering these discounts.
4. Money for “rainy days”
If we were to put away a penny every time it rained in Bergen then we would have had a healthy savings account. With rainy days we talk about emergencies where you need extra money. What happens if the refrigerator is destroyed tomorrow? Having a credit card gives you extra security in case an unexpected situation arises. As long as you have good control of your personal finances, there is no reason why “Mr. Plastic” cannot save the day!
5. It doesn’t look the worst in your wallet
Many people think so, few say. Yes, a credit card improves the overall look of your wallet. If the card has some interesting colors (preferably gold, silver or black) then it may even help you find a girlfriend.
More and more of us are buying things online, whether it’s shoes or a new mobile phone. Not only is it easy to use a credit card when paying, but it is also safe, as most credit cards have both purchase and theft insurance.
7. Financial management (yes, seriously!)
Every time you pay with a card, whether it is a credit card or debit card, the sale is saved as a transaction inside your online bank. Using a credit card makes it easier for you to get a good overview of what goes out each month. Based on this information you can choose to set a budget.
8. Travel insurance
Most good credit cards offer travel insurance if half of the trip is paid with the credit card. Why is it favorable? Well, you don’t have to buy extra travel insurance and you can spend your money on something else. Even better, you can put the money into a savings account!
9. Accepted worldwide
These days everything happens online, and then we mean everything! As both Visa and MasterCard are accepted worldwide, which means you always have access to money, wherever you are! This is especially beneficial for those who are traveling a lot.
Should I get a credit card?
The simple answer is yes, but only if you manage to pay your bills on time and manage to take full advantage of the benefits that a credit card can offer.