Although credit cards have their fair share of both strengths and weaknesses, the advantages that come with owning credit cards do largely outweigh the disadvantages for most people when used responsibly. What are the pros and cons of credit cards that you should be aware of before applying for a credit card?
The Pros and Cons of Credit Cards
With carrying heaps of cash around a thing of the past, credit cards are easier to conceal and carry around. Credit cards offer the convenient choice of spreading out the cost of larger purchases, or using buy now and pay later methods. Additionally, in the unfortunate case of credit card theft, you won’t be liable for any unauthorized charges, unlike cash.
Each month, credit card companies will relay account information to the major credit bureaus, allowing you to build a solid credit history. As long as your account is left open and is in relatively good standing, positive information will start flowing in to your reports.
Whether these rewards are in the form of cash backs, miles, points or gas rebates, many credit cards provide rewards that not only help reduce the cost of purchases, but also provide certain amenities such as discounts and exclusive access to shows, special gifts, and more.
When you own a credit card, it can be tempting to spend more than you would with tangible cash. Naturally, the first most obvious disadvantage to owning credit cards is overspending and getting into debt.
Luckily, there are a few ways to free yourself of debt, including budgeting, tackling small loans first, or using educational resources such as podcasts, books, or online courses such as Debt To Success System. You may be thinking, is DTSS legit? Yes! There are many free resources available online to help you on your way to financial stability and freedom.
High Interest Rates
As credit card interest rates are typically higher than the rates on loans, it’s important to pay credit card balances in full to avoid any financial repercussions. Allowing your credit card debt to build up alongside missed payments can directly impact your credit rating, making it increasingly difficult to apply for credit in the future.
Fees and Charges
If you aren’t able to meet your repayments or you continue to exceed your credit limit, credit cards can present high fees and charges. This is why it is extremely important to keep track of your financial behaviour while you are using your credit card.
- Shop around: Not all credit cards are equal, so it can help to do your research before applying for a particular credit card. For example, look for credit cards with lower interest rates and fewer fees.
- Have a plan to pay off larger purchases: Think carefully and responsibility when deciding to make larger purchases.
Avoid credit card fraud: Remember to check your account frequently throughout the week to check for any suspicious charges, and never reveal your credit card details online or on the phone unless you have been in contact with them before.