According to the latest figures, rising consumer debt represents a ticking time bomb in the UK.
In fact, separate statistics from the trade association UK Finance suggest that customers accumulated £17.1 billion of credit card debt in October, while it’s estimated that consumer debt nationwide could hit a staggering £6.7 trillion by the year 2023.
While this casts the concept of borrowing and using credit cards in a negative light, however, there are instances in which taking out a line of credit can prove beneficial. We’ll break this down in further detail below.
When Should you Consider Having a Credit Card?
If you’ve previously struggled with mounting debts or a negative credit history, the chances are that you’ll be discouraged from opening up new lines of credit in the future.
After all, it can seem counter-intuitive to open a new line of credit if you’re already paying off existing debts, while even those who aren’t encumbered financially may be loath to take out a loan or a credit card.
In both of these instances, however, having an active credit can be beneficial if this situation is managed well. This is particularly true in the case of products that have been designed for those with bad credit, with firms like Ocean Finance having developed products specifically for applicants who have been adversely affected by the global financial crisis.
This type of credit card, which typically has a low limit and minimal interest charges, can be used to enter into positive financial transactions on a monthly basis. As these are repaid regularly and on-time, you’ll maintain a zero balance and actively improve your credit score over a continued period of time.
Why Maintaining Existing Cards can Also Boost your Credit Score
If you do have a bad or minimal credit history, you should never have more than one active credit (as otherwise your debt mountain may grow and become difficult to control).
If you have an existing credit card with a zero balance, however, you can continue to use this responsibly and to cover manageable monthly repayments. This will also impact positively on your credit score, so long as you clear the balance in full before additional interest is applied.
By responsibly using your credit card to pay for your monthly shopping and repaying this sum in cash before the accrual of interest, for example, you’ll create positive footprints on your credit file while even accessing cashback (and rewards) in some instances.
In this respect, owning and using an active credit can have a positive impact on your finances, so long as you spend responsibility and remain within your means at all times.