The Short Answer: Why Do I Need a Credit Card?

Credit
cards
aren’t
the
only
way
to
build
credit.
One
way
I
was
already
building
mine
before
I
had
a
credit
card
was
by
repaying
my
student
loans.
Even
paying
your
rent
and
utilities
payments
on
time
has
an
impact
on
your
credit
score.

That
said,
there
are
several
other
reasons
to
consider
credit
cards.
They
come
with
perks
such
as:

• Rewards
and
bonuses:
many
credit
card
companies
offer
this
in
the
form
of
cash
back,
airline
miles,
or
even
sign-up
bonuses;

• Protection:
your
identity
and
money
are
more
secure
when
you
use
a
credit
card
because
it’s
not
directly
linked
to
your
account
like
a
debit
card
is;

• Emergency
cushion:
emergencies
can
pop
up
at
any
time
and
at
any
place.
This
is
why
we
encourage
everyone
to
save
up
to
three
to
six
months’
worth
of
expenses
in
an emergency
fund.
If
your
emergency
fund
is
tapped
or
you
need
to
quickly
make
a
large,
unexpected
payment,
a
credit
card
can
be
a
good
Band-Aid
in
an
absolute
emergency.
Don’t
make
this
a
habit,
though –
it
can
get
you
into
trouble
down
the
road.

What
Should
I
Know
Before
I
Get
One?

Having
a
credit
card
sounds
easy
and
almost
perfect,
right?
Before
you
apply
for
one,
here
are
a
few
things
to
consider:

Fees

You’ll
want
to
make
sure
to
read
the
fine
print
to
know
how
much
the
credit
card
company
charges
for
late
fees,
yearly
fees
(if
there
is
one –
yes,
you
can
get
a
credit
card
for
free!),
foreign
transaction
fees,
and
so
on.

APR

This
is
the
annual
percentage
rate,
which
is
the
yearly
interest
you’re
paying
to
borrow
money.
As
long
as
you
pay
off
your
credit
card
every
month,
you
won’t
have
to
worry
too
much
about
this.

Your
Habits

One
of
the
key
things
to
know
before
you
sign
up
for
a
credit
card
is
yourself.
It’s
easy
to
get
carried
away
with
a
new
credit
card,
especially
if
you
have
a tendency
to
overspend
or
disregard
your
budget.
Missing
payments
and
adding
onto
your
debt
will
hurt
your
credit.

Should
I
Pay
Off
My
Credit
Card
Every
Month?

Simply
put:
if
you
can
pay
off
your
balance,
do
it.

It’s
a
common
myth
that
it
pays
to
have
a
balance.
This
is
where
credit
cards
can
become
a
slippery
slope.
If
you
hold
off
on
paying
your
credit
card,
it’s
easy
for
these
situations
to
become
an
issue
later:

•
You
miss
when
your
credit
card
bill
is
due.
The
result:
You’re
hit
with
a
late
fee;

• You
tack
onto
your
already
existing
balance,
creeping
up
closer
to
your
credit
limit.
The
result:
you
hurt
your
credit
score;

• You
get
into
the
habit
of
carrying
a
sizable
balance
from
the
previous
month
to
the
next
month.
The
result:
your
interest
grows.
This
means
the
total
amount
you
owe
grows,
too.

The
earlier
you
pay
off
your
credit
card,
the
better.
Make
sure
to
stay
on
top
of
it
by
setting
up
automatic
payments.

Can
You
Pay
it
Off
With
Another
Credit
Card?

The
question
here
isn’t
really
a
“can
you?”,
it’s
a
“should
you?”

In
other
words,
no,
you
can’t
directly
pay
off
one
credit
card
with
another.
However,
you
may
be
able
to
do
a
balance
transfer,
which
means
moving
your
debt
from
one
credit
card
to
another
with
lower
interest
rates.
It
may
even
be
possible
to
get
a
card
with
a
0%
interest
rate
for
a
limited
time.
So
while
this
doesn’t
exactly
count
as
a
payment
toward
your
balance,
it
does
reduce
the
total
amount
owed
on
the
credit
card.

Still,
depending
on
the
amount
you
need
to
transfer,
there
may
be
a
fee,
which
can
trim
the
total
benefit
of
the
balance
transfer. This
article
from
Credit
Karma goes
into
the
pros
and
cons
of
this
approach.

Another
option
for
paying
off
a
credit
card
is
to
take
out
a
loan.
Before
moving
forward
with
a
decision
like
this,
it’s
always
important
to
consider
your
current
financial
standing
and
weigh
your
options.

Can
You
Pay
Off
a
Loan
With
a
Credit
Card?

While
this
may
be
an
option
(depending
on
the
lender
and
type
of
loan),
we
encourage
you
to
explore
some
other
options
before
you
go
this
route.

In
this
case,
we
recommend
finding
a
strategy
to
pay
down
your
debt.
There
are two
common
methods here:

• The
debt
snowball:
this
involves
making
minimum
payments
on
all
your
debts
while
putting
extra
cash
toward
the
smallest
amount
and
paying
that
off
first.

• The
debt
avalanche:
This
focuses
on
paying
down
the
debt
with
the
highest
interest
rate
first
and
then
moving
onto
the
next
balance.

The
debt
avalanche
is
the
more
“efficient
method,
but
if
you
like
to
rack
up
early
wins
(and
confidence!),
the
debt
snowball
is
a
good
option
for
you.

P.S.
If
you
have
an
emergency
fund,
you
can
use
it
for
this,
too.

Does
Paying
it
Off
Increase
My
Credit
Score?

Paying
on
time
will
always
help
your
credit
score.
Here
are
some
other
ways
you
can boost
your
score:

• Don’t
borrow
too
much
too
often.
Experts
typically
recommend
keeping
your
credit
utilisation
rate
below
30%
of
your
limit;

• Keep
your
card
with
the
best
history
of
on-time
payments
open;

• Have
a
mix.
When
you’re
ready
and
able,
managing
several
different
types
of
credit,
like
a
mortgage
or
auto
loan,
can
improve
your
score;

• Accept
your
mistakes
and
make
up
for
them.
This
is
another
way
that
having
multiple
credit
types
can
help;

• Fix
any
minor
errors,
like
an
incorrect
address.

It’s
also
a
good
idea
to
check
your
credit
report
at
least
once
a
year.
Various
credit
scoring
apps
are
available.
If
you’re
having
serious
problems
with
debt,
visit StepChange,
the
UK’s
leading
debt
charity.

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