It is not about the size of your bank account or your five-figure monthly salary that proves your eligibility for a credit card. Owning a credit card takes more than just that.
This plastic card, the epitome of cool and trendy, is often on the list of ‘must-haves’ among young working adults due to its ‘magical’ abilities.
Simply swipe it and you’ll get the item you desire. There’s no longer the need to worry about how much of money you have in your wallet or if you’ve saved enough pocket money for the item.
Now, that’s also the downside of credit cards. Excessively using this ‘magic card’ could get you in serious debt faster than you know it.
According to statistics from the first half of 2017, it was reported that 845 individuals above the age of 30 declared bankruptcy due to unpaid credit card debts.
So, before you own a credit card, ask yourself, “Am I fit enough to have a credit card?”
To help you out in your decision making, we’ll take you on a step-by-step guide that will help you decide if it’s time to empty a card slot in your wallet and make way for a credit card or put those credit card applications on hold till you’re ready for one.
- Why do I need a credit card?
Is it because all your friends have one? Or perhaps it’s just more convenient to swipe away instead of carrying cash around?
A credit card does provide better security especially if you’re making a large purchase, instead of carrying a stack of money notes around. However, it is not ‘secure enough’ if you do not have good discipline when it comes to controlling your expenditure. If that turns out to be the case, you could tarnish your credit history if you’re not able to clear all debts on time and this could create a larger financial issue.
- How often do I plan on using the card?
Will the credit card be used just for emergencies? Or will it be for your daily expenses? There are many reasons to owning a credit card but the most important factor is for you to make a firm decision about what you would use your card for. For example, some cards do offer discounts on certain purchases such as for petrol or grocery shopping which could help your pocket.
No matter what your reason is to own a credit card, draw a line on the type of purchases you would make with your card and be sure to never cross the line.
- Am I disciplined enough to say no to impulsive purchases?
Would you immediately purchase an item with your credit card? After all, you will have a pretty large credit limit, even though your income is not sufficient to cover the total cost. Plus, you’ll have a cashback discount or earn credit card points and that makes your purchase all ‘worth it’? Or would you walk away and give it a thought?
If you’re an impulsive shopper, owning a credit card might not be the best option especially if you’re unable to control your spending.
- Do I have a monthly income?
Do you have a stable full-time job? Will your financial situation improve next year? If your answer is “yes”, it is possible to consider a credit card if needed. Paying your credit card bill regularly and in full is important to maintain your credit history.
- Do I keep track of my finances?
Is it a common habit of yours to diligently keep track of your daily expenditure to ensure that you do not spend more than you should? There are many apps and tools that can help you do so and if your answer is ‘yes’, it is possible to consider a credit card.
If your answer is ‘no’, perhaps you should build this habit before signing up for a card. Take it as a reward and once you’ve gotten a hang of controlling your finances well, you could then consider applying for a credit card.
- If my monthly credit card bill has reached its limits and I’m not able to repay the debt, what should I do?
This dreaded situation is more common than you think and it could occur to anyone if you do not use your credit card wisely. Ask yourself this question and have a contingency plan if the situation occurs.
Do you have enough savings that could you help you pay for your debt? Remember, accumulating your credit card debt will only cause a larger damage to your pocket and if not addressed, it could lead to bankruptcy. So, be sure to spend wisely and within the means of your bank account.
The most amazing feeling when using a credit card is that, you do not “feel” your purchases until you receive your credit card statement. By then, it’s probably a bit too late especially if you spend way more than your bank account allows. So, take your time when deciding to apply for a credit card. Never fall for promotion gimmicks which will only provide temporary joy if you are unable to control your spending. Instead, spend wisely and be your own smart and responsible finance expert.