When to get a credit card (and when to get more than one) 

Credit cards are one of the most often misunderstood financial products available on the market. This is not least because the misunderstanding tends to be spread by credit card providers, issuers and banks themselves.

It's down to them that consumers often regard credit cards as items which confer status in and of themselves and are innately useful, although this is far from the case. It's also often forgotten that they are a product in which risk is often traded against ability to manage credit, on the part of the card holder as well as the company that's offering them the card.

For example, to take advantage of one of the offers available using purchase credit cards you have to balance your ability to avoid paying interest (as much as possible) with the benefit of spreading the cost of a big payment or getting the goods you want straight away, rather than saving up for them. So, when should you get a credit card?

In general, you should only get a credit card when you have a reason to get one. In other words, a problem that can't be solved by getting another financial product. This is to balance the risk of running up high interest payments with the benefits of owning a credit card at all.

For example, credit cards can offer extra protection under law but so can a scheme from Visa, even with debit cards. So when you compare credit cards you should keep in mind the reason for getting a card.

There are several reasons including short term borrowing of small amounts (larger amounts or over longer periods and borrowing using a personal loan is likely to be more cost effective), paying off another high interest card debt at zero interest, paying off loans or overdrafts at zero interest and/or gaining extra rewards by moving ordinary spending to a plastic card.

In general, you should only use one credit card for one job. This is because attempting to do more with one card can quickly become confusing and end up costing a lot of money. For example, when using balance transfer credit cards the amount you pay to the plastic provider is generally attributed to the balance transfer first which means that consumers can find themselves unable to pay off purchases made on the card.

Left unpaid, these purchases could themselves run up interest payments which is obviously not an ideal situation.  For this reason, it's often worth getting another credit card rather than relying on just one for everything.

by Julia Cook

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