Advantages and Disadvantages of Using a Credit Card

Image courtesy of Sean Macentee
Image courtesy of Sean Macentee

Most people these days have a credit card. They can be really useful but they also have disadvantages as well. It is worth weighing up the pros and cons if you are deciding whether to have one, whether to get another one or whether to keep the one that you have.

The great thing about a credit card is that you can buy things and you do not have to pay for them immediately. You can therefore buy some things and you may not have to pay for them until the next time that you are paid. You may even delay paying them for longer as there will only be a minimum necessary amount to pay on a credit card. It can be extremely useful for emergencies as well, if you run out of money and need to buy food, for example you can use the card. Credit cards are also really great for online purchases. They are more secure than debit cards and you can usually get your money back if you are subject to fraud which adds an extra level of protection. Sometimes you cannot pay online if you do not have a card and so it means that by having a card, you will have more options for where you purchase things. Some cards also give cashback. This means that for every penny you spend, you will get points or money back. It will not be a large amount, but it can add up to quite a bit over several months or years. If you pay off the amount that you have spent each month, you will normally not have to pay anything for having a credit card, although some do have a yearly charge.

However, a credit card can be an expensive way to borrow money and it can be easy to build up a lot of debt with one. Lenders have a habit of extending the credit limit if you make the minimum repayments and this means that you can easily borrow more money. The interest can be really expensive and it can be easy to build up extra debt, just paying off the interest and not reducing the amount of money that you owe. It is possible to not pay the money owed back for years and you could find that you are left with no choice but to take out another card if you need money in an emergency. This means that you will build up even more debt and it can easily get worse and worse. This is why it is important to make sure that you pay off the whole balance each month. You can easily set up a direct debit to do this and then you will never have to pay any interest on the credit card and you will not have outstanding debt either. If you feel that this will not be something that you will be able to manage, then it could be a good idea to not get a credit card in the first place. It is unwise to put yourself at the risk of getting into debt if you think that it could become a big problem for you.

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Rachel Henderson is a professional freelance writer from the UK. She writes on many subjects but specialises in personal finance. As well as contributing to various blogs and websites she has her own website tracking her own money making process http://www.turnonepoundintoonemillion.com and sells her books through http://www.bowbridgepublishing.com.

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