Five reasons to close your credit card
A credit card can come in handy when you are low on cash, but when not well-managed, it can cripple you financially. Here are five reasons why it is a good idea to not have a credit card.
Roughly 1.25-billion people have credit cards or nearly 16% of the global population, states Expensify.
When managed well, credit cards are good.
Having a credit card can come in handy when you are low on cash. It can also help you build a credit score, and if you use it well, it can help increase your score.
Many credit card deals come with cashback rewards, travel benefits etc.
A credit card can also be very convenient because you don't need to take out a loan or borrow from people in case of emergencies.
READ: Expert advice: Using debt to invest
But there are also disadvantages to having a credit card:
Monthly charges
Banks charge monthly service/facility fees on their accounts. You will need to pay monthly fees for banking with the company. So, whether you use your card or not, in some instances, you will still need to pay the service fee just because you have an account with them.
Interest
Financial institutions make money by charging interest on credit. The percentage of credit varies according to financial institutions and the product you choose. So, you will end up paying more than you received from the bank.
Live outside your means
Credit cards can give the illusion that you have money, which you don't. As a result, you might end up buying things you don't need.
The temptation to spend more
A credit card can give you a false sense of security, leading you to believe that you can easily pay off the debt when you get some extra cash. However, the more you spend, the more you find yourself needing money for unexpected costs, which makes it harder to pay off the debt. This means you take one step forward and two steps back.
Hurt your credit score
Failure to pay your credit card on time will negatively affect your credit score and this can affect your future loan applications.
It can also result in higher interest rates.
If you don't own property and want to rent, a negative credit score can make it difficult to be approved for the rental.
What's worse, a bad credit score can even negatively affect job opportunities.
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