Questions to Ask Yourself Before Taking Out Another Credit Card
Credit card debt is a huge problem in Australia and all over the world. Families and individuals have found themselves relying on plastic and digging themselves into a hole of financial burden. However, if used correctly, credit cards can actually increase your credit rating, make it easier to take out loans, and even land you a job. (Yes, believe it or not, sometimes employers check your credit score.)
Much of your credit rating has to do with your ability to properly manage several different cards, because it shows companies and loan officers that you are good for your money. After all, anyone (hopefully) can manage just one card, but it takes a financially savvy and organized individual to stay on top of a few.
Do I really need another credit card?
The answer could be yes. For example, if you need to quickly boost your credit rating, taking out another card and thus reducing your debt to limit ratio could prove to be beneficial. That is, if you use the card wisely and don’t max it out.
Are there benefits associated with my card?
More often than not, rewards cards are a total bust. You sign up for a retail card to get a measly 15% savings and then what? You get slammed with high interest rates while barely shopping at that store.
Other reward cards – like airline miles and hotel points – can prove to be incredibly beneficial, because they can actually save you a lot of money on big expenses. They also have huge partnerships with banks, stores and restaurants, making it easy to rack up the miles.
The kind of reward card you apply for mostly depends on what needs you have. Just remember to keep in mind the following:
- It is a credit card and thus needs to be paid each month.
- They have high interest rates so you’d better pay the full amount every month.
- There is usually an annual fee associated with the card, although it is waived for the first year and there are several ways to get it waived after that.
What is my history with credit cards?
Ok, this is a loaded question. That is to say, it comes with a whole slew of sub-questions that are important to consider when thinking about taking out a credit card.
Are you known to dig yourself into a hole of debt? Do you find that you easily mismanage money? Are you organized enough with your finances to budget yourself? Have you been known to put basic amenities like food on the credit card because you didn’t have enough cash?
Keep in mind that a credit card is a responsibility that needs to be accounted for in your budget. If you haven’t been responsible with them in the past, you may want to brush up on your personal finance skills before taking out another one.
Credit cards, while incredibly useful and a staple in your financial life, come with a lot of responsibility. Before taking out another card, make sure to take a good look at your finances and weigh your card options. That way, you can ensure you don’t take on more credit than you can manage.
Image by Beau Giles
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I agree. Credit cards need to be used wisely. Credit can increase your leverage for buying items but if its abused it can hurt you with getting financing for your major purchases.
That’s all too true – making mistakes with your credit card can have a huge impact on your future financing options. Wise words!