Credit cards are a double-edged sword to be used wisely
While these little bits of plastic are a boon to some - they can also be the source of deep debt for others. Credit cards have made our pockets lighter, literally and figuratively speaking, and while it's easy to succumb to the lure of deferred payment, many have been mired in debt without realising it, ruining their credit rating.
Credit cards do have advantages - the flexibility in terms of time; the advantage of accessing large sums of money, without actually worrying about your bank balance.
So while our spending limit can be strengthened you must always be careful to only purchase what you can afford to pay back.
"With a credit card you decide how much you want to spend and how much you want to pay. You can pay 100 per cent or as little as five per cent.
"You can split your big transactions into flexible installments at low interest rates. You can look for deals, discounts and offers on your card to save money," says Kamala Iyer, Head of Marketing and Products - Credit Cards Middle East, HSBC Bank Middle East Limited.
"You have access to a credit limit that you can utilise during emergencies. Traveling is safer with a card rather than carrying cash. The list of advantages is endless, plus with the added benefit of getting reward points for all you spend you really can't go wrong," adds Iyer.
If credit cards are used sensibly they can be a useful financial tool, but if not, they can cause financial difficulty.
Consumers are constantly bombarded by offers from various banks and stores, each offering different incentives to entice prospective consumers to sign up for a card. As a result individuals struggle to balance several cards and become entangled in debt.
"I often have five or six different cards at a time. In all I have around 15 different credit cards, including those from my country and the UAE," says Richard Boyd a UAE-based physical therapist.
Certain individuals apply for more credit cards in hope of reducing high interest rates, which is often the main enemy of all credit card bills.
"Different banks offer zero percent interest for the first six months, so I tend to open an account with that bank and then transfer my balance from one card to another. Then six months later I'll do the same thing again," explains Boyd.
Experts advise individuals to allocate money for all purchases made on credit cards in order to pay off whatever has been borrowed in the quickest way possible.
Credit cards can help consumers be more efficient. Iyer highlights tips that consumers should follow to ensure they use their credit card to its full advantage.
"Do not let your card out of sight and ensure you get your card back after every transaction. Protect your card as if it were cash. If you have received a new card ensure that the old card is destroyed immediately.
"Do not leave your card unattended at any time, never write your credit card PIN - always remember it.
"Avoid using your card on unsecured internet sites, secure sites usually have a lock symbol at the bottom of the screen. And always have your contact numbers up-to-date with your bank. This will allow us to reach you in case of any emergencies."
Always read the small print. Often interest rates are explained within this section. Taking time to read through the terms and conditions will ensure you are aware of all aspects involved in opening an account. This could save you money in the future.
