Most people have a credit card in their wallet, but is it wise to use it all the time?
If you ask the CEOs of Commonwealth Bank of Australia (ASX: CBA) or Westpac Banking Corp (ASX: WBC) I'm sure they would say yes in a heartbeat.
You might have seen a number of stories about how people got themselves into tens of thousands of dollars of debt and couldn't get out of the negative cycle. You definitely don't want to be one of those people. If you can't control your spending then a credit card is not for you.
However, many credit card users pay off their balance in full every month, so technically these people might be better off as long as they don't spend more than they would have with just a debit card. It's no use gaining a few cents if you're spending dollars to get it.
There are a few supposed benefits with a credit card. The first benefit is improved cashflow. You can buy the item or service and pay for it weeks later. I'm not sure how much benefit a regular person can get from that cashflow help unless they temporarily put the money in a savings account until it's time to pay off that month's credit card statement.
Other benefits the credit card companies would boast of are: improved credit protection, reward points, benefits as a card member, perhaps insurance and so on. It's a good backup if your main transaction account had to be locked because of theft.
Australian credit cards are not as attractive as American credit cards, so I don't think there is as much benefit to having one.
In the same way that I prefer ASX shares with zero debt, overall I think it's better to avoid credit cards even if there are some positives compared to a credit card.
