Don’t use your credit card unless you really REALLY have to

Estimated reading time: 4 mins

Using credit cards should only be a last resort. This is because credit cards can be one of the most expensive ways to borrow money, and can quickly lead to unmanageable debt if not used responsibly. Credit cards can also have a negative impact on your credit score if you are unable to pay them off in full each month.

By understanding the implications of using credit cards, and knowing when to avoid them altogether, you can protect yourself from taking on more debt than you can handle. In this article I will discuss why using credit cards should only be a last resort, with examples of when they may be appropriate and how to use them safely.

Check this post out: What to do when you have no other choice than to use your Credit Card

One of the main reasons for not relying too heavily on credit cards is that they are an incredibly expensive way to borrow money. Credit card interest rates are much higher than those associated with other types of borrowing such as personal loans or mortgages. The average APR (annual percentage rate) for UK credit cards is currently around 20%, meaning that any unpaid balance will incur interest charges at this rate every year until it’s paid off in full. This means that if you don’t pay back your balance in full each month then any purchases made could easily double in cost due to these high interest charges. For example, if you spend £1,000 on your card and only make minimum payments each month then it would take over 5 years (and an extra £800) just to pay off the original purchase amount!

Not being able to pay back what you owe on time could also have a significant impact on your credit score as missed payments or failing to keep up with minimum payments due will show up negatively on any reports lenders look at when deciding whether or not they want to offer you finance such as a loan or mortgage. A poor credit score may mean it’s harder for you get approved for finance or even increase the cost of borrowing by making lenders charge higher interest rates due their increased risk.

credit card debt

It is important therefore that we understand when it might be appropriate for us to use our credit card – even though it should generally always be seen as a last resort – so we aren’t putting ourselves at financial risk unnecessarily. For example, there are some instances when using your card may be necessary such as booking flights or hotels where often no other payment method will suffice, however even here it pays dividends if possible not just paying with plastic but rather working out what method would end up being cheaper overall – such as transferring money from savings into your current account then paying with debit instead. In general however, unless absolutely necessary try avoiding using your card unless you know without doubt that you will have enough funds available within 24 hours after making the transaction so that it doesn’t go into arrears – one solution here might involve setting up an overdraft facility, although this too would need careful consideration first since overdrafts usually come with their own set of fees which could end up costing more than expected!

Another way in which we can protect ourselves from getting into unmanageable debt is by practising the ‘50-30-20 rule’ which suggests allocating 50% of disposable income towards essential expenses like rent and bills, 30% towards leisure activities like eating out or shopping, while allocating the remaining 20% towards savings/emergency funds and paying down any existing debts (including those accrued via use of our credit card). This approach has been suggested by financial experts, including members from The Money Advice Service, who suggest following this formula helps consumers stay within their budget while still allowing themselves some freedom financially. Additionally having emergency funds set aside means we’re less likely ever having turn towards our plastic for help during times hardship – avoiding serious financial issues further down the line!

Ultimately whilst there may well be times where using our credit card makes sense – such as those already mentioned – generally speaking these should still always been seen as an absolute last resort given how costly they can ultimately become; particularly if we find ourselves unable continue paying back what we owe each month in full and thus end up accruing hefty amounts of interest along way! Therefore understanding exactly how these products work before turning towards them plus practising simple financial techniques like setting aside emergency funds/paying down existing debts before ever reaching out plastic again provide us best chance possible staying afloat financially without having rely upon them too heavily!

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