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A credit card should always be treated as an easily accessible emergency fund, and never as a spending licence. Having a credit card is a good way to keep your credit score positive, provided you do not deplete the balance and pay it consistently. Below are the pros and cons of having a credit card:
- Knowing you have access to money in an emergency, such as a car breaking down.
- Travelling is made easier. Although most travel companies and hotels will accept a booking without a credit card, it is easier and more convenient to do so through a credit card. Provided you replace the money immediately.
- It makes online shopping easier, as most online retailers prefer credit card payments as opposed to systems like Paypal.
- Credit card theft and card cloning can result in unforeseen expenses and a lengthy battle with the credit company.
- Reckless and impulse spending can empty a credit card and leave with you a hefty monthly bill.
- Hidden fees and changes in interest rates can cause payments to increase, and these payments may not meet the consumer’s budget.
Ultimately most credit experts and debt counsellors advise against a credit card with a high balance, insisting instead on starting with a credit card that has a small amount available and gradually increasing the credit available.
Article written by: Andrea van Tonder 02-2013