Advantages and Disadvantages of Credit Cards
Credit cards, like any other financial instrument, come with their advantages and disadvantages. Before signing up for a credit card, get every detail clear. People land in trouble for not understanding simple things before making a financial decision. It is advisable to do some research from reliable financial experts. Look out for more financial tips on Payday Depot.
How to Use a Credit Card Effectively
Never miss a payment.
Repay more than the least amount.
Pick a card that fits your needs.
Use your card selectively.
Set an automatic debit in case you forget to repay.
Advantages of Using a Credit Card
1. Builds credit history
Borrowing and repaying builds trust. Similarly, responsible use of credit cards helps one qualify for higher loans with better interest rates.
2. Easy way to get an interest free loan
Credit cards let you borrow free within a given period, after which the loans attract interest. Cardholders can enjoy this benefit as long as they continue repaying the required amount within the agreed period. Unlike other loans, credit cards will not charge you if you repay on time.
3. Use during an emergency
Whenever an emergency strikes, a credit card can help you spend even when you have no money. This cushions you from financial problems that may otherwise affect your normal operations.
4. Helps reduce debt
A balance transfer credit card allows the user to transfer their existing loans to one account. This involves a low or no interest. It reduces the amount payable on interest, helping offset the debts quicker.
Credit cards reduce the risks involved in carrying cash. Most of the retail stores accept credit cards; hence, the customer does not have to walk around with money. They are also suitable for making online purchases.
Disadvantages of Using a Credit Card
1. Increase in debts
Credit cards are very tempting and may lead you to a pool of debts. Some credit cards charge interest rates of up to 20% if you do not repay your debt on time.
2. Negative impact on credit score
Missed payments may hurt ones credit score. Never let your debt build-up. Obtaining a loan with a low credit limit may be very difficult.
3. Promotes overspending
Credit cards make it easy to access finances in times of financial distress. Easy access to funds before earning it makes overspending easy. If you are not keen, you may get yourself in unplanned debts.
There are fees charged in case you fail to repay your debt within the agreed time. Late payments attract interests and costs. Never exceed the given credit limit and always repay on time.
5. Fraud possibility
Electronic payments, such as credit cards, attract fraudsters. Credit cards can be hacked if one copies the numbers. Loss of identity can lead to huge losses in a theft.
If you are thinking of obtaining a credit card, do your research. Compare the advantages and disadvantages associated with credit cards before making your final decision. Use this article to get great insights and make an informed financial decision. Expert Payday Loans is your ideal solution whenever you need financial advice.