Why Credit Cards are a Good Thing

Written by Karen Bryan

We live in a world of instant credit and ‘buy now, pay later’, but applying for a credit card is still a scary experience. Firstly, the lender might say “no” when you fill in an application, and secondly, what happens if you go on a massive spending spree and then lose your job? Yes, there are some pitfalls!

However, it is important to realise that owning at least one credit card is important – and here’s why.

Emergency Cover

Credit cards are a lifesaver in times of strife. Imagine going on a trip overseas and suddenly discovering your wallet has been lifted from your pocket. What do you do? How on earth are you going to manage with a week left before the flight home?

If you lose your wallet, cash is lost forever but a credit card is always replaceable. When disaster strikes, all you need to do is make a call to your Credit Card Company and report the card as stolen. The company will cancel your card and issue a new one, often within 24 hours. Visa and MasterCard are accepted in most places, so the holiday won’t be ruined.

Don’t forget, too, that credit cards offer better exchange rates abroad than debit cards. So, if you fall in love with a rug in a Turkish carpet store, whip out your Visa card and save some money.

Build a Credit Rating

From a lender’s perspective, young people are an unknown quantity. They don’t have credit, so the lender has no idea whether they are a high risk for a loan or mortgage. Consequently, the lender is likely to say “no” when you apply for a car loan.

Applying for a credit card is a useful way to build a credit rating. Using the card responsibly will reassure lenders you are not going to blow your credit on designer shoes and run up a massive debt. If you have poor credit, there are cards that help you restore your credit history. They come with higher APRs, but so long as you use the card responsibly, your credit rating will improve.

Earn Rewards

Who doesn’t enjoy earning rewards for spending? There are several credit cards with attractive rewards schemes. Rewards range from loyalty points, cashback deals, and air miles. Use your credit card to buy groceries, fuel, or pay your monthly utility bills, and earn rewards. If you repay the card balance in full each month, it won’t cost you a penny, but the rewards will soon add up.

Imagine, if you use your credit card for all household expenditure plus big ticket purchases, you could eventually earn enough air miles for a return flight to Australia!

Insurance

The other main reason to own a credit card is that it protects any purchases you make. So, if you buy a washing machine and the store goes bust before your purchase is delivered, you can claim a full refund via the credit card company.

Don’t be afraid of owning a credit card. Used responsibly, credit cards are a valuable tool.