In recent years, credit cards have actually become quite a vital financial tool. According to statistics 70% of the users have credit cards in the USA while it is recorded that every Australian adult possesses one credit card at least. Credit cards are not just known for their convenience, the easy pay back options are what makes a credit card an attractive financial option if used in a responsible manner. But the downside is that you can get in a debt trap if the credit card is not used in a responsible manner or if it is overspent beyond the limit.
Now if you are planning to get a hold on the credit card, we have curated a list of pros and cons before you get on the bandwagon.
Pros Of Using A Credit Card
Credit Access Is Convenient
One of the biggest advantages of having a credit card is that since it works on the basis of deferred payment, you can make purchases with the help of the credit card and pay for it later. No need to worry about cash in the bank account because when you make purchases, it doesn’t not dent your bank account each time you make a purchase via credit card.
Exceptional Way To Build Credit History
See when you borrow money from the bank and pay it back, that builds up your credit history. Each time you open an account with any bank, a credit reporting agency will get the information from the lender. Since your credit history is based on your credit score, that gives the lenders an idea if you are a correct candidate to give loan or rental applications. Also, it also gives an idea to the lender to set your interest rates and credit limits depending on your credit history.
Perks For Members
Credit cards are not just a convenient financial tool, its use also leads to some great rewards including cashbacks and reward points every time you make a purchase with the credit card. These incentives can be used later in the shape of frequent miles or could be used for payment outstanding dues. If you are making purchases for let’s say holidays, big purchases or flight tickets, discounts can be availed by credit card users provided by the lender.
Cons Of Using A Credit Card
Easy To Overspend
Credit cards are quite convenient to use which make it all the more susceptible to overspending. If you treat them like an infinite pool of money, one can lure into using it and thus overspending it. Which is why it is extremely important to keep a tab on making purchases and not to overspend way beyond the means.
Possibility Of Credit Fraud
It is not a very common occurrence but credit cards can lead to frauds and you can be one of the victims. The advancement in technology has made it possible to duplicate a credit card and gather all the confidential information via which an entity or a fraudster can make purchases on your credit card. The only way to be safe while using a credit card is to keep a tab on your purchases and inform the bank officials if any dubious purchases are noticed on the statements.
Credit cards are the most convenient and easy to use financial tools but the hidden costs while making purchases could really make a hole in your pocket. Credit cards sometimes come with lots of expenses and fees like opening account fee, renewal fee, and also if you miss a card payment and keep on delaying the payments can also lead to hidden charges.