The Pros and Cons of Credit Cards

Credit cards continue to grow in popularity. They provide a convenient payment method among consumers. Credit cards are equally good and bad. They can either make your financial life easier or ruin it. They can help you to build a great credit score. Credit cards can also bring challenges, especially when not used responsibly.

If you want to get a credit card, consider its pros and cons before you can make your decision.

The Pros of using credit cards

1. Credit cards can help you build your credit score

When you use a credit card instead of a debit card and make payments on time, it can help you build a strong credit history and credit score. When your credit score is excellent, you will save money down the line. Top credit score can help you get the best loan interest rates, mortgage, and best price for auto insurance. To build up your credit score, ensure that you use your credit cards and make your payments on time. If you have substantial debt, and you struggle to pay them off, it would be wise as shark tank expert Kevin Harrington puts it, to take a debt consolidation loan and clear your other debts.

2. Credit cards offer you a convenient way to get cash quickly

A credit card provides you with instant access to make payments. It can help in emergencies. You should keep a credit card with a low-interest rate for such kind of situations. Maybe you need cash that you can pay off in two months, but you cannot pay it off with the cash flow of one month. In such a scenario, credit is the best option. However, if all your credit cards have high-interest rates or you know you can’t pay off the bill for months or years, it would be wise to choose another option of paying the bill, like taking a personal loan.

3. Credit cards are more secure than cash

There is no doubt that credit cards offer security more than cash. That’s why many people use them, even those that have cash. In case someone steals your information or you lose your credit card, once you notify your credit card company, they can place a hold on it to prevent fraudulent purchases. Moreover, a majority of credit card companies are always on the lookout for suspicious activities, and they will notify you if they notice something inconsistent with your usual spending behavior.

4. Reward points

Many credit companies give out rewards such as cashback or airline miles for using them regularly. If you use your credit card for routine expenses, the rewards can add up faster. Even though the rewards come with annual fees, the benefits that you can enjoy over the year is better than the cost of keeping the card open.

The cons of using credit cards

1. The high cost of borrowing

Even though credit cards are convenient, the cost of borrowing is relatively higher than with traditional loans. Many have high APRs [annual rates charged on borrowed money], penalties for late payments, and service fees. Failure to pay off your balance every month can make the charges to grow your existing debt quickly. Moreover, some credit cards allow you to get a cash advance if you need cash instantly. But the interest rate charges are higher than for purchases.

2. Credit cards can make it easy for you to get into huge debts

Depending on your credit limit, a new credit card may suddenly make you access more funds than you have had in the past, making it easy for you to overspend if you are not disciplined. To avoid getting into too much debt and ruining your financial health, you should only spend what you can afford and pay back every month. If you don’t have a budget already, you should create one to help you stay on track and avoid accumulating too much debt.

Final thoughts

Now that you have read the pros and cons of using credit cards, you can go ahead and get one. Choose a credit card that is suitable for you. Different credit cards have different features; remember to choose one that suits your spending style. And use it responsibly.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.