The use of credit cards can either be helpful when handled correctly or it can be detrimental when done otherwise. This is actually so convenient for most people because it can be used to transact business or purchase goods without the need for cash. However, the greatest challenge when you have a credit card is being unaware how the terms should work for you, which can get you in deep financial trouble. So, before you engage in using credit cards to make your life easier, try to reflect on the following pros and cons first.
List of Pros of Credit Cards
1. Convenience in Making Transactions
When you have a credit card, it is so convenient to have a cashless transaction. In fact, you can use it anywhere, even overseas.
2. Purchasing Power
Since it can be used to purchase services and goods when you are on the phone, over the Web and even when you rely on the local mail service, this can give you a boost on your purchasing power.
3. Financial Backup
This mode of payment can be used during emergencies like when you run into some unexpected cost of healthcare, loss of employment or some car repair dilemma.
4. Raises Credit Score
The use of credit cards can help you raise your credit score. This is possible when you pay your balances not later than the due date. This improvement in your credit history can also give you the advantage to avail of lower rates on other loans, such as mortgage.
5. Reward Points
Using a credit card will allow you to purchase goods but you can pay them off through monthly installments. For this method, you will be given rewards and discounts from particular stores. In fact, you can collect points that can accumulate in which you can use to get free items, including airline tickets.
List of Cons of Credit Cards
1. Overspending Issues
Some people who possess credit cards feel that they are being compelled for spending more money than they actually earn. This is because they can have an option to purchase more items even if it’s already beyond their payment capacity.
2. Accumulating Fees
A default on your payments can lead to charging interests and late fees, which can increase your debt load. Thus, having too much of this debt can actually ruin your credit score.
3. Possible Bankruptcy
Aside from not being too favorable to the lenders, carrying a huge amount of credit card can lead to consumer bankruptcy. More so, it can make customers roll over their balances continuously for several months.
4. Possibility of Fraud
Credit cards can also be used in a fraudulent manner especially if the owner is not aware of it. Criminals can steal credit cards without the knowledge of the customer. This will be used to purchase goods up to its maximum limit and by the time the owner realizes it, he or she will be faced with bills for purchases not even made by the actual customer.
Perhaps you already have an idea how credit cards actually work. The pros and cons mentioned here can be your basis on whether or not you will take advantage of acquiring credit cards in the near future.
Natalie Regoli, Esq. is the author of this post and the editor-in-chief of our blog. She received her B.A. in Economics from the University of Washington and her Masters in Law from The University of Texas School of Law. In addition to being a seasoned writer, Natalie has almost two decades of experience as a lawyer and banker. If you would like to reach out to contact Natalie, then go here to send her a message.