How to choose a credit card – and reasons why you shouldn’t

It’s so convenient to flash the plastic these days that it can seem essential to have a credit card. But that’s not so. There are several reasons why you should think about getting one – but also many reasons why you shouldn’t.

It comes down to this: can you resist the temptation to overspend on credit? Or are you likely to give in to a bit of pleasing retail therapy or stick a round of drinks – or several rounds – on your card?

Credit cards have become dangerous long-term debts for millions of people.

With a credit card comes the responsibility to spend sensibly. If you use it to overspend, you could be heading for financial problems. And while it may seem fine to owe a few hundred or a few thousand on credit if you’re in a decently-paid job, repaying that debt could turn into a major problem if you end up out of work, or have built up other debts.

Don’t presume it won’t happen to you. Credit cards have become dangerous long-term debts for millions of people, according to StepChange debt charity.

It warns that more than 200,000 people contacted it for help with credit card debt last year with the average person owing nearly £8,500. In the past five years it has helped people struggling with £8.6billion on credit cards. Be careful that you don’t add to those statistics.

Ensure you pay off your every month to avoid expensive charges.

So when should you get a credit card? If you want to build up your credit score – maybe to get a mortgage in the future – then having a card is essential to prove that you can manage debt. But you should plan your spending on it and ensure you pay it off every month to avoid expensive charges.

If you can do that then a card will prove a convenient way to pay in-store and online. Even better the right card will pay cashback or give discounts which means you can end up a savvier spender.

Which cards should you consider? Look, if you really will pay it off every month – and you must – then the interest charges won’t matter. Instead you should look at the benefits.

There are around 30 credit cards that offer so-called rewards. Check out the Which? roundup to get an idea of what’s on offer. Then choose a card that matches your existing spending habits to get maximum benefit.

But don’t feel tempted to spend just to get extra rewards. That would be foolish. Stick to your usual spending and get rewards where you can and remember to pay off the outstanding balance every month, and on time. In fact, set up a direct debit from your current account to ensure you don’t miss repayment deadlines and be hit with charges.

Finally, a word of warning. There are several cards offering 0 per cent interest deals, some for years. But they are simply designed to keep you in debt. Card companies know that borrowers tend not to repay their cards which means even if you transfer from one 0 per cent deal to another, you will be hit by transfer fees of around 3 per cent.

Don’t fall into their trap. Take control of your credit card rather than let the company supplying it control you.

[Pic credit: Rainbow of Credit by Frankie Leon]