Many of us will have accredit card and some of us may have more than one. Although having credit cards can have advantages there are also risks. It is worth understanding these and then you can make up your mind whether a credit card is right for you and whether you should consider having more than one.
Advantages of a credit card
A credit card is a very convenient way to spend money. Not only is it accepted in most shops but it delays the payment on the items which means that you get some interest free credit. The cards are a secure way to pay for things as you get some insurance cover if things are not as described or do not turn up if you buy them online. They also have fraud cover so if the card gets stolen you should be able to get back any money that was stolen and the card will quickly be cancelled and you will be reissued with another.
The interest free credit can be really advantageous financially. If you buy items through the month on the card, you can keep your money in a savings account and earn interest on it until the card needs to be repaid. This will mean that you will actually profit from the card, as long as you always repay it in full and there are no card charges of any sort. You can even get cards that will give you cashback or rewards and so you get given things in exchange for spending money. This can mean that you will benefit even more but if you do not repay the whole balance you will end up paying out more than the reward is worth. So be very wary of this if you do go for a card of this sort. Also make sure that you do not spend more than necessary because you are hoping to earn more rewards. The value of the reward will never be worth more than what you have spent out.
Risks of a credit card
There are risks with using a credit card. If you use it online then your details could be intercepted and money stolen form you. However, the risk is better than with a debit card and so it is probably wiser to use a credit card rather than a debit card for online transactions. However, you can protect yourself further by using a third-party account such as Paypal.
The main risks of really with getting into debt. If you spend more on your credit card than you can afford to pay back then you will have an outstanding balance. This is within the terms of the card but it means that you will have to pay interest. When you are spending using a card it is hard to keep track of how much you are spending. This means that it can be easy to spend more than you can afford. It is possible to check your card balance as you will be able to do online banking and do this. This is a wise thing to do so that you know how much your bill will be and can make sure that you keep enough money by to pay it and stop spending when you think that it will be too expensive.
Obviously, some people are better at doing this than others. Some like to treat themselves and often spend more than they can really afford. Others would rather have money behind them in savings and so will keep a constant check on their spending to make sure that it does not go to high. Obviously, you will also need to know how much you can afford to spend as well, which means that you need to be aware of how much money you have coming in and how much you need to cover your bills.
Needing more than one credit card is not usually necessary unless you have a very low credit limit on a card and would like to be able to have more money available to you. You might want this if you buy a lot of things online and need the security of a card or want to spend more money than is available. It is so important that you do your best to repay the outstanding balance each month and as you need to be careful that with two cards you do not spend more than you can afford.
Are they right for me?
It is a very personal decision as to whether you should have one credit card or in fact two credit cards. You need to ask yourself what you will use it for and whether it will be in your financial advantage. Will it cost you too much money or will it help you? You need to be really honest with yourself about this and weight up the advantages and risks.