Thursday, October 31, 2013

Do You Really Need a Credit Card? [Guest Post]

Do you really need a credit card? The answer to this question would depend on your general attitude toward spending, saving, and debt. So in essence, the only person who can tell you whether or not you need a credit card is none other than you. There have been many people with tragic stories about how credit card debt have affected their lives negatively. The reason usually is that these individuals allowed themselves to be “controlled” by their credit cards instead of the other way around.It is important that you take some time to think things thoroughly before you make a decision. Read the following guidelines to help you decide on whether you really do need a credit card:

Why do I need a credit card? 

Credit cards are ideal for making emergency payments or large purchases that you would find easier to pay back on an instalment basis. Credit cards also offer convenience when booking flights or shopping for merchandise online. They are globally accepted and on top of that, offer insurance protection and some rewards. 

What are your own reasons for wanting a credit card? Do you intend to use it for shopping on eBay or Amazon? Do you want one because everybody says it’s how you build a credit history? Or do you just want one as a backup for emergencies? Determine how exactly a credit card can be beneficial to the kind of lifestyle you have.

How important is it to build a good credit score?

A good credit score improves your status in the eyes of lenders and financial institutions. In the event that you would apply for a house loan, car loan, or personal loan, your credit score would help them see how good of a borrower you are – whether or not you know how to repay debt. Credit card transactions definitely help boost your credit score – if you are a responsible payer. So unless you are absolutely sure you can responsibly pay back debts you incurred, it might be better that you do not get a credit card at all.

There are some other ways to build a good credit score aside from credit card transactions, such as getting someone with good credit standing co-sign for a loan. Applying for a secured credit card or being a supplementary card holder for someone else’s account can reflect positively on your score, too. Actually, even paying your utility bills on time have a positive impact on your credit score.

But if you look at it another way, you can still get a job, buy a house, rent a place, and pretty much live normally, given you know how to live within your means, without any credit history whatsoever.

Do I have sufficient savings?

For most households, a savings fund in the amount of about three times your monthly income is considered sufficient to cover emergency expenses and buy time to look for additional funds in case you need to. For emergencies, there are other options available such as personal loans, which, as compared to credit cards, come with lower interest rates and are payable over a reasonable period of time.

Credit card rewards: How much do I need them?

Credit card companies offer different kinds of rewards to card holders in exchange for regular usage, charging a certain amount on the card, and/or paying off on time. These rewards may either come in the form of cashbacks, travel miles, and free merchandise. But if you factor in annual fees, can you be sure that the rewards promised are worth it? If not, apply for a card that has no annual fee requirements. Or maybe get a debit card.

A lot of debit cards now offer rewards points for regular usage as well. This financial instrument is actually worth considering because with a debit card, you will not be forced to spend beyond your means, which is what you might end up doing if you get a credit card and end up mismanaging your finances.

This article is written by, the most comprehensive financial comparison service in Malaysia. Compare credit cards, broadband plan, and others at a competitive price.

*Reproduced with permissions. All rights reserved*


  1. Hi SGYI

    Believe it or not, it is only this year in 2013 that ive got my first ever credit card from scb to use and that is because my mum asked me to again m again.

    I understand that if use prudently credit cards can hv many advantages over cashback and rewards which we can utilise. But I dont know if it is that useful n if people can feel the cashback. Afterall the more you spend the more cashback you get. If you hardly spent then the cashback would be minimal.

    1. Hi B,

      I use debit cards. All of them without annual fees. The one from scb that I have gives 1% cash back. It was 2% earlier this year.

      I guess cash backs will encourage you to spend more. If someone can't control their spending then its better not to be tempted. But for me, I use it to pay for my school fees where the cash back is really significant. :)

      It can be beneficial if you know how to use it. :p

  2. As long as you had the stable income every month to pay your credit cards that would be not a problem.