This article answers 5 basic questions about the nuances of using credit cards. They will help you decide if you need a credit card, why you need one and whether it is beneficial to have one.

Why do you need a credit card: what is it and how does it work?

A credit card is a plastic or virtual card for making purchases. If your debit card holds your money, a credit card holds the bank’s money. When you pay with a credit card at a supermarket, online shop or restaurant, you are borrowing money from the bank. You will then have to pay it back.

A credit card has a limit: a restriction on the amount of money you can spend. The bank determines the limit by analysing your income and credit history.

There is no cost to issue the card, but you will be charged a fee, expressed as an annual percentage, for using the money. The terms and conditions usually include an interest-free period during which you may not pay interest.

The purpose of a credit card is not to afford more. Its purpose is to optimise short-term financial flows.

Is it worth applying for a credit card if you don’t need the money?

Another misconception is that a credit card is necessary for those who are short of money. On the contrary, it is recommended to use a credit card only if you have an amount in your account that fully covers the limit. In this case, it helps you save money and not incur unnecessary expenses.

How to use a credit card profitably?

Here is the most suitable scheme that will hepl you not only avoid paying interest on your credit card, but also get additional benefits.

Find out how long the grace period is. It’s usually 51-60 days. It is important to remember that this period is counted from the beginning of the period. For example, if the period starts on the 1st day and you made a purchase by the 15th day, the 51-60 days should be counted from the first day. Some banks have a longer grace period, up to 365 days, but with additional conditions. The longer the waiting period, the more favourable it will be to use the credit card.

Pay off your credit card debt before the waiting period ends. Set a payment day in your calendar. Please make your payment 2-3 days before the deadline to exclude force majeure.

Use your credit card only to pay for goods and services. The interest-free period does not count if you use your credit card incorrectly. For example, withdrawing cash or transferring money to another account. Pay in shops and services with a credit card, but pay off debts and make transfers with a debit card.

Do not exceed your monthly spending limit. Do not spend more on your credit card than you have left in your salary account: this way you will be sure to pay off your debts on time.

Should I use a credit card if my income is unstable?

To use a credit card safely and avoid accumulating debt, you must be 100% sure that you will repay it on time. How you achieve this depends on your ability to manage your personal budget.

If you have an unstable income and you don’t know what will be tomorrow, you shouldn’t live in debt. If you take care of your ability to pay in advance and keep a sufficient reserve for reimbursement, a credit card, on the contrary, will be a convenient tool that will help you save money and live peacefully from payment to payment.

Is a credit card considered as a loan?

A credit card can be categorised as a credit product because:

• Money spent with a credit card is credit;
• The limit of open credit cards is taken into account when calculating your credit load;
• Credit card usage data goes into your credit history.

Credit card usage affects your credit history.

Whether it is worth opening a credit card depends on your financial situation, the stability of your income and your ability to manage your finances. It can be a great help to a savvy consumer or it can cause more problems for someone who is not good with money.