Should I Get My First Credit Card?

by : Jamie Jaggernauth

At one point or the other in our lives we have yearned for access to more cash- credit card anyone? After saving, saving and spending and repeating this cycle from our first job to our last, it's a phenomenon that we all experience.

"I want to buy that new telly!"
"When are we going on vacation?"
"I hate carrying around cash all the time!"

Have you ever found yourself saying these lines, thinking them or repeating them at least once a month?

At first glance, a credit card is one of the most convenient and commonly used sources of funding that one can have. Its small, plastic and some are actually quite colourful. Indeed, its more convenient than having to carry around a bundle of quid in your purse or wallet and above all, some credit cards are accepted worldwide- beneficial to those of us that travel frequently. Its one of the easiest methods of payment; the bank (the issuer) lends money to the consumer (in the form of a credit card), whereby payment can be made to various merchants. Terms and conditions of resolving the balance of credit are set up by the issuer and agreed upon by the consumer. This way, a constant credit facility is provided, once the payments are made in good standing.

Managing your spending can prove to be beneficial at the months' end when credit card payments are due. Credit card issuers usually waive charges if your spending balance is cleared off in full each month. However, if you do not pay your total balance, full interest will be charged on the entire outstanding balance from the date of each purchase.

Robert and Devon both received their credit cards at the same time. Robert was a careful spender and paid off the balance of ?250.00 on his schoolbooks using his card. The grace period for the card was two weeks, in which he had this time to pay off his balance or interest would begin to accrue. Seeing that this was his first credit card, interest rates were startlingly high for Robert. However, being the responsible spender that he was, he repaid his credit within the grace period and faced no interest charges.

However, things were a little different for his friend Devon. Devon, the less responsible of the two, spent ?960.00 on clothes, shoes and gifts for his girlfriend. He forgot about the interest that accrued and ignored the payment date within twenty days as stated by his bank. One week overdue, Devon now had to pay not only his outstanding balance, but also an additional 8% per day on all his transactions.

In addition to wiser spending habits, Devon could have avoided this problem by acquiring a low interest credit card or even a 0% interest credit card. What he should have done was to explore his credit options with his issuing bank; therefore, he could have made a different repayment agreement, having to pay an annual fee as opposed to facing exorbitant interest rates.

Exercising care and caution when coming to handling a credit card proves to have several benefits to be enjoyed. Due to the intense competition in the credit card industry, issuers constantly have promotions and incentives for their customers- for example frequent flier points, gift vouchers, discounts and vacation contests...even cash back!

Well, you might also want to know "what's in it for me?" In addition to convenient, accessible credit, credit cards offer consumers an easy way to track their personal spending. This is advantageous for both monitoring personal expenses and tracking work related expenses (for taxation and reimbursement purposes). Credit cards are accepted worldwide; and even though most issuers set a limit for overseas spending, we will still have access to money in times of emergency and convenient purchasing.