Advantages and Disadvantages of Credit Card
It's always to consider the Advantages and Disadvantages of Credit Card before you plan to have one. A credit card provides a convenient method to consumers for making everyday purchases such as gas, groceries, and other goods and services.
Credit cards give you much freedom to spend and purchase as you wish. You get to enjoy privileged services once you get a Credit card. Credit card benefits is one of the most popular reasons why people opt for them. Can there be any disadvantages of using credit card? Let's find out.
What are the Advantages of Credit Card?
Instant ability to borrow money for big purchases is one of the common advantages of having credit cards that give you purchasing power. There are other benefits associated with it, and they can help you save money in the long run.
1. The freedom to buy now and pay later
Most credit card companies offer deals to users, encouraging them to purchase using their credit card. You can pay for a purchase using your card today and pay off your credit card balance in future. A credit card is often considered a common payment method for shopping.
In case you don’t have enough cash on you, you can rely on your credit card and pay for the bills at the end of your billing cycle. Usually, many credit card issuers offer users a grace period, so you don’t have to worry about the interest charges.
One of the common advantages of having credit card is that there’s no need to carry cash all the time. You can’t even carry a huge sum in your wallet for big purchases.
On the other hand, a Credit card keeps your money safe from robbers as you transact for your groceries and pay your bills securely through plastic cards. The only thing to be concerned about is to mind the checking balance and consider what you buy and whether you are able to cover that or not.
3. Rewards, offers, and Perks
If you are a regular shopper, there are plenty of credit card benefits that come to you in the form of cashback offers, purchase rewards, and perks. For each time you swipe your card, there are points you can collect and redeem to pay for your outstanding balance.
Many credit card companies also offer discounts on purchases made through a credit card, such as flight tickets, large purchases, online shopping, etc. If you are a frequent traveler, you can redeem your collected points to book air tickets or hotel rooms.
4. Ability to Track your Spending
A credit card lets you track your expenses through your monthly statement and online account. Recordkeeping is essential to determine and track your spending and purchases, which could be useful when speculating a budget or taxes.
Instant notifications remind you of little to major purchases you make every time you swipe your card, thanks to the technological revolution. You can stay on the right track and spend wisely knowing how much of the amount of credit is still available as well as the current outstanding on your card.
5. Credit card is the Best option for Emergency
Running out of cash is something that happens to everyone at some point. You can use your credit card for emergency use, such as medical bills or hospital charges, in case of a mishap. In case of medical urgency, you might not have a huge amount to cash ready.
However, carrying in such a situation can be one of the significant advantages of credit card as it can save you from trouble. You don’t have to rely on other sources to use as a contingency. Once paid for the healthcare services via credit card, you can adjust the amount in your billing cycle.
What are the Disadvantages of Credit Card?
With all the advantages that come along the disadvantages of credit card that you must consider.
1. Excessive use
Since credit card gives you the freedom to spend, you might find it tempting to spend on things you don’t actually need. While companies encourage you to shop online for rewards and offers, there are chances of you wasting your credit card on unscrupulous purchases.
Overspending through the month can lead you to a situation where you cannot pay at the end of the billing cycle. This could take a toll on your debts, leading to high-interest rates on your future payments.
2. Higher Interest charges
Credit cards are beneficial when purchasing expensive products and deciding to pay for them through installments instead of paying them off immediately. Unfortunately, you will end up paying the purchase price and the interest charge on that item.
In simpler words, you’ll have to pay extra for the purchased item. Furthermore, if you do not clear your dues by your billing due date, the amount is carried forward, and interest is charged on it.
3. Late Payment Charges & Fee
Missing or delaying your monthly credit card payment can land you in more fiscal trouble. Even if you delay the payment by one day, the credit card company has the right to charge you with late fee. It may sound surprising, but every company tracks consumers’ activities and can hand you lists of late fees that you don’t even know of.
4. Credit card fraud
Credit card fraud: The plastic card seems to get a lot of purchasing power to customers, thanks to the technology. However, these cards are the easiest ways to be duped by scammers and fraudsters. Thousands of websites run these scams worldwide by asking users to enter their Credit Card details, disguising themselves as a service provider.
Users are advised by the government time and again not to give away their credit card numbers online unless the site is secure and reputable. Make sure you are purchasing merchandise from a reputable source. It’s always advised to do your homework on the individual or company to ensure that they are legitimate.
5. Credit damage
Missing a single payment or delaying your payments in a row can damage your credit. Keep in mind that all the activities are recorded on your credit file and impact your chances of getting a loan in the future.
Make sure you pay the due balance at the end of each month as per your billing cycle. If it’s something you can’t keep up, you need to control your spending habits.
Provided credit cards are a savior in an emergency, they can be useful in many cases when you need to rely more on digital payments rather than paper money. However, you must be extremely careful as overusing them may bring you problems that can even lead to some other issues such as bad credit. Meanwhile, keep yourself aware of the Advantages and Disadvantages of Credit Card before applying for one.