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Credit Cards have become an increasingly popular method of payment for all allowing us to make large purchases or take out short-term loans… A major source of identification, it provides you with the convenience of a month's time to pay for the purchases or loans before finance charges kick in… While credit cards are easy to use, it tempts one to spend more than you can afford leading to debts…
Advantages
There are number of ways in which a credit card can be beneficial and advantageous:
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It makes a safe alternative to cash… One does not have to carry loads of cash or check books in his / her bag or pocket… hence reducing the need to carry cash or check books. If you are, credit card is stolen, you can report the missing card to the card company and then the company will stop accepting any charges made on your card.
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Emergencies like hospital, car break down, flood, fire, or towing company or motel charges – Having a credit card is useful, where you can bail your self out in time of emergencies.
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If you make any big purchases, you get extra time to save and pay for what you just charged before the finance charges are levied. A cost free form of finance, as long as you repay the money within the grace period.
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Enhanced personal responsibility and independence. If you use your card responsibly, you are likely to build a good credit rating history. If you plan to take a loan at a later stage in life, your credit history will help you get one, as the lender will want proof that you pay your debts in time. A poor credit history will work against you.
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Credit cards may offer you additional protection if something you have bought is lost, damaged, or stolen. Both your credit card statement and the company can vouch for the fact that you have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases; can protect your goods in the event of loss or theft.
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Credit cards are international and can be used all over the world, wherever you see the logo on your card… In addition to the benefits listed above, some credit cards offer perks such as discount vouchers from particular stores or company, cash back rewards on purchases, free air miles or travel discounts and special insurances like travel, medical or life.
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Disadvantages
While most of the benefits are meant to encourage you to charge more money on your credit card, they will be helpful as long as you remember your spending limit. Despite the advantages, there are also numbers of way in which credit cards usage can be less positive…
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The biggest disadvantage is that this piece of plastic is so easy to use that it encourages people to spend money that they do not have. Since one is required to pay a fixed amount every month, spending up to £200 or £500 seems like free money at all times. It creates an avenue for increase impulse buying; it can blow up your monthly budget.
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If you fail to repay your borrowings within a stipulated period, they tend to be expensive, since credit card companies charge you interest on late payments. The interest rates can be 10 times the balance amount or more also. In short, it just adds to increasing your debts.
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Some credit card companies levy service charges on usage or non-usage of credit cards. If you report that your card is stolen, it is likely that company will reissue a new card for a small fee. These are few of the things that can add up to additional costs of having a credit card.
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Financial difficulties may arise if you lose track of how much you spend each month. Hence, it is advisable to keep receipts of purchases made. Sometime purchases made abroad may not appear on your statements for a few months, therefore its advisable to keep track, else they could have been reported incorrectly. Crosscheck your receipts with your monthly statements. If you come across any discrepancies, report it immediately to the company.
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If you are using your credit card for purchases online, make sure that the payment is done through secured sites or else hackers can get hold of your information and use it until they desire and rack up your debts.
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Credit cards can make life easier and be a great tool, but if they are not used wisely, they can become a huge financial burden.
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