Considering a Credit Card When You Start Your Career?

Credit cards have become an integral part of our daily lives, allowing us to make purchases without carrying cash. With various benefits, such as building credit history, worldwide acceptance, and cashback rewards, they are popular among consumers, especially Gen Z and Millennials. However, credit cards also have drawbacks, such as high interest rates and the potential for overspending, which can lead to accumulating debt.

Many individuals believe that they should apply for a credit card as soon as they land a job, while others think it may not be a wise choice. However, it is essential to make informed financial decisions as a wrong decision can lead to poor financial health. Therefore, we are here to assist you in understanding how obtaining a credit card when you begin a job can be a good decision, but only if you consider some important points.

Benefits of Getting a Credit Card When You Start a Job

Build Your Credit Score

A person with no credit history may find it hard to avail of a loan. Banks provide credit facilities to borrowers based on their credit history. The credit history is a record of creditworthiness, dependent on the borrower’s borrowing and repayment ability. Banks keep a timeline of the credit activity of an individual borrower and report that to the credit reporting agencies in India, viz, CIBIL, CIRF Highmark, Equifax, and Experian. These agencies assign a credit score based on the credit history. A good score will help the borrower get loans approved by banks quickly. It will also help in availing of credit at a considerably lower interest rate.

Make Big Purchases

Starting a new job can give you a promising feeling that you can finally achieve your dreams. You can use your credit card to buy anything you desire. Credit cards offer you the chance to make big purchases and pay for them later. If you want to buy something that costs more than your income, you can pay for it in monthly installments on your credit card EMI. However, it’s important to remember to pay your bills on time.

Save More

When you start a job, you can save more. Credit cards give you an amazing opportunity to save on almost all your spending. Some credit cards provide you with cashback, and others earn you reward points that you can redeem against various options. So, saving something every time you purchase something using your credit card would be a great idea rather than purchasing it using cash.

Use In Emergencies

Owning a credit card is like having a backup plan for unexpected situations where cash is needed urgently. It works as a safety net in your wallet that can be used in case of emergencies such as medical or financial crises. However, it’s important to remember that a credit card is not free money and needs to be paid back to the bank, possibly with extra charges.

Discounts, Cashback, Offers and Deals

Discounts, cashback, offers, and deals come with a range of benefits that make shopping more rewarding. Firstly, they help save money, allowing you to stretch your budget further. This can be especially beneficial when purchasing big-ticket items or during festive seasons. Secondly, they can introduce you to new products or services you might not have considered before, enhancing your shopping experience. Moreover, cashback offers provide an added advantage by returning a portion of the spent amount back to you, which can be used for future purchases.

Drawbacks of Getting a Credit Card When You Start a Job

Hidden Costs

Credit cards can be convenient and offer many benefits, but they also come with hidden costs that many people are unaware of. These costs can add up quickly and make paying off the credit card debt hard. Some hidden credit card costs include annual fees, balance transfer fees, cash advance fees, and foreign transaction fees. It’s important to understand these hidden costs before choosing a credit card so that the cardholder makes an informed decision before applying for a credit card.

High-Interest Charges

High-interest charges on credit cards are like a silent drain on your wallet. When you buy something with a credit card and don’t pay off the full amount by the due date, the credit card company starts charging you interest on the remaining balance. This interest can pile up quickly, making it harder to pay off what you owe and costing you much more than you initially spent. To avoid getting caught in this trap, it’s a good idea to pay off the full balance every month, if possible, or at least aim to pay more than the minimum amount required.

Credit Card Fraud

Credit card fraud is when someone uses your credit card or credit account to make purchases without your permission. It can happen in different ways, like if someone steals your credit card details online or if a lost or stolen card is used by someone else. This type of fraud can lead to unauthorized charges on your account and can be a hassle to resolve, affecting your credit score and finances. It’s important to keep an eye on your credit card statements and report any suspicious activity to your bank immediately.

Spending More Than You Can Afford

When using a credit card, it can be easy to lose track of how much you’re spending, especially if you don’t keep track of your purchases. This can lead to overspending and accumulating debt that can be difficult to pay off. Credit card companies make it easy to spend more than you can afford by offering high credit limits and enticing rewards programs. Therefore, sticking to your budget plans and using the card responsibly is better.

Bottom Line

Deciding whether or not to get a credit card when starting a new job is an important choice that depends on personal financial habits and goals. Credit cards offer great benefits like building your credit score, making large purchases more manageable with EMI options, saving money through cashback and rewards, and providing a safety net for emergencies. These advantages can make it tempting to apply for one as soon as you start earning.

However, it’s crucial to be aware of the drawbacks. Credit cards come with hidden costs, high interest rates if you don’t pay the full balance on time, and the risk of credit card fraud. Plus, they can lead to overspending, which might result in accumulating debt that’s hard to pay off.

Everything can have positive and negative consequences. Getting a credit card when you have just started a job can be a good decision for people who use it responsibly, whereas it can be a poor decision for others who find it challenging to manage their cards and are left with unmanageable debt. Everyone can make the right decision for themselves by keeping the above-mentioned points in mind. If you have started a job and want a credit card, you can go for it.