Credit cards are neither all good nor are they all bad. They offer a long list of benefits but also carry a share of risks. They can be a huge blessing to some people but a source of stress for others. Only you can determine whether or not they will help or harm you. A great way to find out is by asking yourself these credit card questions before you apply for one.

Do I really need a credit card? Why?

Different people have different reasons for wanting a credit card. What’s yours?

  • Do you want a one so you don’t have to carry cash with you all the time?
  • Are you looking at it as a tool to fund any emergency need that may come up?
  • Do you think it can help you snag some good deals on necessary purchases, saving you money in the bargain?
  • Are you tempted by the perks and rewards that credit card companies offer?
  • Wanting to build up your credit history?

If your reasons for getting a card are just for making it easier to fund a lavish lifestyle, you may want to reconsider. Sure your credit card will help you do that but it will eventually lead to your financial ruin.

Am I an impulsive/compulsive shopper?

Impulsive shoppers buy anything they see and like, regardless of whether or not they need the item. If you are an impulsive or compulsive shopper, having a credit card can be detrimental to your financial health. It will only serve as an enabler to your bad spending habits and tempt you to overspend.

Be honest with yourself. Consider getting a credit card only if you are sure you are capable of reigning in your spending habits.

Will I be able to make the monthly payments on time?

This one may be the most important of all the credit card questions. Take some time to think about your answer.

If you can make the payments on time, every time, that’s fantastic. On-time payments will help you build your credit score. Good credit history makes it easier for you to get approved for loans in the future. It also helps you get loans at a lower rate of interest.

However, if you’re not sure whether you’ll be able to make the payments on time, you need to reconsider. Credit card companies impose high penalties on late payments. You miss one payment because you can’t afford it and the next month will only get worse. You now have to make two months’ payments plus the penalty on the last missed payment.

And don’t be fooled by the ‘minimum payment’ clause that most credit card companies offer. It may make it sound like the payments will be a breeze. The reality is quite different. Making the minimum payment may help you avoid paying the penalty, but you will still have to pay interest on the unpaid amount. Credit card debt attracts among the highest interest rates. Making only minimum payments repeatedly will keep you in debt for a long time.

If you think you may not be able to pay the full amount every month, don’t get that credit card. The only way to avoid debt under these circumstances is to curb your spending.

When did I last apply for a new credit card?

If you last applied for a credit card less than six months ago, it’s best not to apply for a new one. Credit card applications usually trigger a hard check on your credit report. Every hard inquiry causes a drop in your credit score. This drop is not permanent. Your credit score should improve in about 6 to 12 months.

However, multiple hard inquiries on your report within a short period of time will cause a significant drop in your score. It will also take longer for your score to recover. Your lower credit score will make it more difficult for you to get approved for any other loan. Even if you do, you will pay much higher interest rates.

Am I planning to make any major purchases over the next two years?

If you’re planning on taking a loan to fund a major purchase, you’ll want to get the lowest interest rate possible. To achieve this, you want to do everything you can to ensure your credit score is at the highest it can be. As we said earlier, applying for a credit card will trigger a hard inquiry on your credit report. This will cause your credit score to drop a few points.

The drop may sound marginal, but it can make a big difference to the cost of your loan. Every point counts when it comes to getting the best interest rates on large loans. The slightest increase in interest rate can add thousands of dollars to your loan amount. This is especially if you are borrowing a large amount.

Ask yourself these vital credit card questions before you apply for one. It’s always best to make the most thought out and well-informed decision possible.