Question 1
Question 1: I have recently left school and have commenced full-time employment. I am thinking of getting a credit card but there are so many different types and terms and conditions that I'm not sure which one would best suit my needs. My intention is to use the card to pay for the majority of my expenses (everything that can be paid for using credit) and then pay the card off in full at the end of the month. Can you recommend two cards that would suit my needs as well as provide any advice or traps to avoid?
A. Credit cards allow individuals to buy now and pay later however rates and fees apply to credit cards where it charges an annual fee as well as interest rate p.a. It is recommended to not use a credit card if you are unable to pay off the borrowed amount. Although they allow you to purchase more, it should only be a backup in the event of an emergency. However, some may use credit cards in an unwise manner as consumers may feel compelled to spend more money than they have which may lead to continously rolling over a balance for several months. As well, aquiring too much credit card debt can ruin your credit score. It is recommended to use a debit card when paying for the majority of your expenses. You should not be relying on a credit card to pay for the majority of your expenses. Firstly, debit cards can keep you within budget as you are limited to spending the amount of money you have in the associated account which prevents you from accumulating debt or being charged interest and fees from a credit card company. Additioanlly, it is much more easier to obtain than a credit card as most banks offer the option to have a debit card linked to your account. You can also easily have access to cash by visitng an ATM machine and withdrawing cash, however some ATM machines may charge a fee.
Here are two cards that would suit your needs:
The first card is a debit card whilst the other is a credit card with low interest rates. A credit card with low interest rates would suit your needs as the lower rates would make it easier for someone who has just left school to be able to pay off their debt owed on the credit card.
(Source: Accounting Concepts and Applications 4th edition, Phillipa Greig, Joan Mackay, Stacey Beaumont, Rosette Sanger, 2008)
