ADVANTAGES AND DISADVANTAGES OF USING CREDIT CARDS

The use of the credit card has been extended to the point where we practically make all our payments with the so-called “plastic money”. Financiers and banks have facilitated access to credit through their cards and we all find it more convenient to use them before carrying money in your pocket. So, we will examine the many advantages and disadvantages of credit cards in this post.

The first thing we have to understand is that a credit card is not the same as a debit card. A debit card charges you instantly from the money you have deposited in your checking account, while a credit card offers you a form of loan to operate. For many, it is useful to see the credit card as “fictitious money” that you do not really have, and have to return within a certain period. So, what are the advantages of a credit card?

Advantages Of Credit Card

The introduction of credit card has brought about a huge number of advantages, especially in an increasingly electronic world. Some of these are listed below:

  • Credit card reduces the need to carry cash around.
  • It gives you access to an extra amount of money.
  • It is the most used payment method for electronic purchases.
  • Most of credit card services usually have a loyalty plan with redeemable points, discounts, repayment of a percentage of the purchases, etc.
  • If we are good payers it allows us to consolidate our credit profile, which will suit us when applying for loans and mortgages.
  • You can defer payments or split them.
  • You can have cash in a moment of urgency, making a transfer to your own account or withdrawing it through the ATM.

It is clear that there are certain rather tempting advantages when it comes to having your own credit card, regardless of the fact that some firms only accept this method of payment. Now, a responsible use and deep understanding of what it entails will allow us to make a good choice and not put a significant dent in the family budget.

Disadvantages Of Credit Card

These are some of the main disadvantages that can affect us if we access a credit card:

  • The use of the credit card usually involves the payment of a series of costs of issuance, maintenance, renewal, extraction through ATM, etc. Look carefully at what commissions the card attracts and make comparisons with other institutions. Make your choice based on your comparison and judgement.
  • Deferred or split payment means the repayment of money will be arranged with an interest rate, which in the end ends up making the purchase more expensive, sometimes alarmingly.
  • There is a risk that your card will be physically stolen or that your data will be stolen over the internet, which could lead to fraudulent operations with your credit card. Some companies offer card insurance that exempts you from liability and reimburses you for the money that may be stolen.
  • Credit card encourages compulsive and thoughtless buying. It is very important to plan very well the use of the credit card to avoid excessive and unnecessary expenses.
  • The non-payment of instalments or terms of use of your card contributes to damaging your credit history, with which you would be closing the doors to the granting of more important and necessary loans.

These are the major advantages and disadvantages of credit card. With these in mind when you are using your credit card at the ATM or electronically, you will be guided from incurring unnecessary expenses.