A credit card has definitely made life convenient and simple. There is no other financial tools and services like a credit card. You simply can get access to your money whenever and wherever you want, you just need to carry the card with you and enter the atm and your cash is there.
Now looking on the other side if you are not careful, you could be charged with a high-interest rate and other fees where you end up worse than when you took the card. You may get addicted to the shopping spree without keeping track of your budget which will definitely hamper your future.
Sometimes you may end up with a card that traps you instead of freeing you. Not all companies motives are the same but you need to choose the one that favours your work, earning and the one with the clauses that you can fulfil. If you are deciding whether or not to take a credit card here are some pros and cons of credit card which might help you make a decision.
Post Content - In Short
- Pros Of Credit Cards
- Cons Of Credit Cards
Pros Of Credit Cards
Money is essential, with an empty pocket you can get or go nowhere and also have the risk of losing or being stolen. Now with a credit card, you are safe as you don’t need to carry single cash with you or the large about of money needed for buying something expensive or doing large transactions and occupies less space so it can be easily kept safe.
You can buy anything without changing the currency and can pay with the card if the facility is available. This convenience of using and its feasibility and access is the aspect of fortis popularity.
2. Build Credit History
The spending has been made easy with cards when you have the money you just need to swipe or put your online details and purchase it. When you do with cash at least you have to track your spendings manually but credit card provides you with the statement which consists of information of all the payment done with money accounted and withdrawn from your account.
It helps to manage your spending and make plans for future spending too. A good credit history even helps you build your credit score and you can apply for loan, secure insurance or mortgage. The difference between good credit score and bad credit score can be thousand of dollars.
3. Emergency Source of Funds
Credits cards are going to be useful in emergency situations such as fast cash and a little bit more cash. You will be carrying some change cash with you anytime but not some big amount which will be needed if you had to repair your vehicle on the highway or you are stuck in some unknown place for days or buy airline tickets. It helps you whenever the situation arises for fast cash and deal with the situation.
4. Payment Protection While Purchasing
While purchasing some goods or going for marketing you don’t need to carry cash with you. If there are many items to get then you might lose some cash in a hurry or you may have to return cash if you don’t have sufficient money but when you use a credit card you don’t have to worry about all those issues. You can freely make a purchase and just swipe a card to make your payment.
It’s safer than carrying the cash itself, your card works like your bank account you are able to use all the money in your account. If the goods you purchased is lost, damaged, or stolen then your credit card statement help you to sort the problem and some credit card companies offer insurance in a large purchase.
6. Reward Scheme
Some credit cards allow you to earn some reward points on the purchase of items according to the money including some money cashback in some items and lucky draw sponsored by some company.
If you are making your payments on time and keeping your balance low then credit card helps you build a good credit score, which qualifies you for some mortgage or loan. There are many reward schemes as such by the different credit cards to encourage their users.
7. Fraud Protection
The credit card companies have safeguarded their design to protect you and your purchases from frauds. If you find something fishy in your statement report to the credit card company they will handle the issue. You can request a chargeback if you find some dispute or find fault in the product.
8. Universal Acceptance
Some credit cards are widely accepted or you can make a purchase using your credit card number overseas too. This is a very good feature of credit card and online shopping. It does not require the exchange of the currency or search for the exchange booth.
Cons Of Credit Cards
The use of a credit card makes your life so easy you won’t bother to think if you are doing it a little more. Sometimes you are allowed to use up to $500 if you have only $100 in your account, you will make the full use of the money.
But when you are unable to pay it then the company charges you interest each month on the money you have borrowed.
2. Interest Charges
You wouldn’t even know why the money in your card is decreasing. Some banks charge interest fees on the credit cards you don’t carry month to month balance limits.
Purchase and cash advance interest rates can be as high as 22% APR, so you end up paying more fine and charges in interest if you are unable to make repayments each month.
3. Extra Fees
Many extra fees are added on the credit card which is deducted without information. Annual fees are a payment charge deducted for the privilege of using the card. The cash advance fee in which if you want to borrow some cash credit card companies provide with some cash and add some 2% to 5% of the cash you borrow. As well as in late payment fees and over-limit fees they charge you with some cash.
4. Can Negatively Affect Credit Scores
The credit card score matters most for the credit card users. But if not managed properly and systematically then that will backfire your score. The score is determined by your ability to responsibly make payments on a variety of credit lines over time. You need to spend wisely to utilize your credit card score in the future.
For example, paying your bill late, not paying bills at all, using too much of your available credit. There will be some restriction or criteria mentioned in the agreement that might help or hamper your credit score that must be followed with full determination or else your credit score gets affected badly.
5. Limited Usage
If you didn’t read the agreement carefully or thoroughly then it might be harmful to you. There are some clauses which state that you need to inform the authority or clear some certain criteria before operating that action.
For example, using the card abroad or charges you will be charged while withdrawing cash, if the wrong pin is pressed more than three times then your atm will be blocked for a day.
6. May Not Help At Emergency
It may not work for you in some urgent situation where withdrawal of the large sum of money is required which might be out of your budget. In another case, if you are not prepared or aware of the atm in the area then not carrying a case can bring you many troubles or if the atm is not working.
7. Credit Card Fraud
Credit cards are a prime target for scammers, where they can access your information without stealing your card. They hack the store where you shop or website to get your card details and make fraudulent purchases.
(Last Updated On: March 8, 2020)