Advantages and Disadvantages of Credit Cards
There are many reasons and advantages to having credit, but in the same vein there are a few disadvantages as well. Knowing the perks and pitfalls can help you decide on whether having a credit card is the right choice for you. If you are looking at getting a credit card for the first time, Credit Card Sir has many great options. If you currently have a credit history that you would like to improve, and need a card that will work with you, please have a look at the Bad Credit section of our site.
-It is an easy way to keep track of your expenses. Every month when you get an itemized list of your purchases, you can see exactly where you are spending the most money. This could be helpful for budgeting purposes, and also if you are trying to cut back on certain expenditures.
-Credit cards are an advantage in emergencies, as they allow you to make a large purchase in a pinch, when you might not have the money to spare. You can then pay the money back when you are in less of a financial crunch, by paying when the bill is due or even keeping it on the credit card and paying interest until you are able to pay it off. This is still a better option than getting a payday loan.
-Building up your credit for future loans and purchases is imperative, and it is ideal if you start as early as possible. A solid credit history will aid you in getting approved for car loans, mortgages, and other large financial decisions. There are ways to increase your credit score and history, but it is easier to start with a good score in the beginning and maintain it than fix one that is poor.
-Ease of purchase is also a big advantage to a credit card. These days, many purchases encourage or even require you to have a credit card, like hotel reservations, car rentals, or internet purchases. You also don’t have to carry around large amounts of cash all the time, so it saves you from needing to know how much cash you will need every time you go out. It also helps you get rid of that pesky change you carry around, if you are using your credit card for smaller things like your daily coffee.
-If you are smart about picking a credit card and using it wisely, you can also use it to save money. There are two main types of cards that help you do this – a cash back credit card and a rewards card. A cash back credit card gives you a certain percentage of ‘cash’ at the end of the month based on the purchases you put on the card in that month. Some even have higher percentages in categories you spend in the most. This cash is often awarded as a credit on your balance in a month of the credit card company’s choosing, but it is money back none the less. It can be especially helpful if it comes at a time when large expenditures are coming up – as in property taxes are due, or the Christmas season is looming. To take the most advantage of this, make sure all possible monthly bills are set up to come out of this credit card as well. Another way to save money is to use a rewards credit card. These cards allow you to earn points each month based on what you buy, and can be redeemed for travel credits or often household goods like small appliances. Save up your points and use them towards something you were going to buy anyway, and you have saved yourself the cost of that item. You can also use them to go on that trip you have always wanted but can’t afford.
–Interest rates on credit cards are quite high. If you are paying interest every month, you will probably be paying around 20% or more for the privilege of using the card and carrying a balance. This can be quite a lot of money that you are not getting a return on – you will be paying the credit card compnay for money that you never actually spent on an item. This is how credit card companies make all of their money, with high interest rates that add up quite quickly when you are carrying a balance.
-Some people are not good money managers, and can quickly get into credit card trouble without realizing it. When you pay for all your purchases with a credit card and don’t keep track of them, it can be easy to go above your budget and not even realize until the bill comes due. People who pay in cash usually do not have this problem as they can see how much physical money is leaving their hands each time they make a purchase. A credit card can mask the amount of money you are spending, and then when the bill comes you might have to resort to paying interest if you do not have the correct amount set aside.
-Unfortunately, even with the amount of protection that credit cards have these days, it is possible to have your credit card compromised and stolen. This can happen whether you use it on the internet or in a store, so there is no absolutely safe way to protect yourself from credit card theft. However, in most cases the credit card companies are quick to correct the issue and will more often than not refund the money that was charged by someone other than yourself.
Having a credit card can be quite a large responsibility, and it is not for everyone. The disadvantages might drive some people away, but if used responsibly, a credit card can be very advantageous for the reasons listed above and more. The main purpose of the article is to highlight some of the things to watch out for if you are getting or currently have a credit card, and to know some of the benefits of using one.