The reasons you might actually need a credit card

How many credit cards do you need? It is relative to why you need more than one or two credit cards. Many people even might not know how many credit cards they have in their wallets.

There is an argument to be made for fewer credit cards, however. Not only will you be able to keep track of your spending, you also will reduce your credit risks. But there are stages in life when getting an extra credit card — or more — can be beneficial. Here are some situations where you might consider getting a credit card to solve a problem or to save.

Building credit history

You build your credit history, well, by taking credit lines. In some countries, like the United States, the number of credit lines you have contribute to how your credit is perceived. You need more than one credit line. So if you’re early on in your life, taking an extra credit card, using it wisely and paying off the outstanding balance can help you build your credit history.

Keep in mind, however, that the length of credit is a factor. So when you take a new credit, card you can shorten the overall average length of credit. Keep this balance in mind if your sole goal is to serve your credit history.

Getting perks or points

Many airlines and retailers offer credit cards with significant perks and offers. Be very selective when you decide which credit cards to pick and from whom. Getting a branded credit card should be a choice you make if you’re sure you will be shopping or using the service frequently. For example, don’t get a credit card for a one-off purchase. But do check what your favourite airline or store offers, because it could be worthwhile. In addition, make sure that the perks you get with this credit card will offset any charges or annual fees.

Be aware of what offers are occasional and what are not. For example, a credit card with cashback benefits is likely to have this perk in the long run. Offers on certain services or products are likely to be occasional, and therefore, not a good basis for making a decision.

Balance transfer

If you’re stuck in a situation with high-interest credit card debt, one solution could be to take a new credit card that offers balance transfer for 0 per cent APR initially. This credit card could help you pause the spiralling interest that is being added to your debt for several months, until you sort out your financial situation.

This won’t work if you don’t see a change coming in your financial situation within the specified period, because eventually you will just end up paying interest again. But it could help by saving you several months of interest, especially if the interest rate afterward is lower than what you already have had. Make sure you get all the information, however, before you transfer your debt. For example, ask if there is a ceiling on how much balance you can transfer, and what rates will apply afterward.

Higher credit limit

If you’re in a situation where your credit card limits are low, getting a new card can give you access to more credit. This could be a slippery slope if you get tempted to use more credit just because it is available.

But if you don’t have any other resources and a credit card could provide some peace of mind — in case of an emergency, go for it. Keep in mind, banks quickly can raise your credit limits if you seem to be low-risk — that is you are on track in terms of paying off your outstanding balances on time.

Be sure to keep track of how much you spend on each card, though. Having your expenses spread across various cards will mean more efforts to monitor expenses and make sure you’re not exceeding your spending and repayment abilities.

— The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.