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Step 1: Do you need a card?

What you'll learn in this step: Like it or not, it’s hard to live without plastic.

For most people, credit cards are a way of buying now, paying later – they're bringing forward purchases of goods and services such as clothing and holidays rather than waiting until they've got the cash in the weeks or months ahead.

Those with good habits will pay off their credit card balance each month – or at least a good portion of it. They use their credit card to 'smooth' out their spending over the course of the year.

Unfortunately, for a minority of people plastic isn't so fantastic. They're using their cards to buy things they want but can't really afford – now or later. They can't pay their card off in full at the end of the month, and their debt seems never-ending.

That said, in this day and age it's a big step to live without a credit card. Have you ever tried buying something by phone or on the internet without a card at hand?

How many times have you handed over a credit card, complete with signature, as identification? How much harder is it to pay your bills in person as banks and businesses close physical branches?

Like it or not, credit cards are part of life for most people. That's why it pays to be familiar with the different characteristics of the various types of card, so you can choose the right mix of interest rate, fees and features for you. Once you've got a card, handle it with care.

In deciding whether you need a credit card, ask yourself:

  • Does my income match my likely credit card spending? or
  • Do I want a credit card so I can buy things I can't really afford?