Advantages and Disadvantages of Using a Credit Card

In the current financial and economical market there have been changes over the past few years to alter money from the tangible form to the electronic form, thus making purchases and the general flow of the economy smoother. Credit cards have become a very significant part of people’s lives. Almost all households in the United States have at least a single credit (following with common knowledge and experience). There are several reasons why one might apply to get a credit card. Credit cards have many advantages that can be utilized by people. These advantages are of course advertised by the credit card companies, to get one to sign for a card. However there are also many disadvantages and hidden issues with credit cards.

The first advantage of using a credit card would be speed and efficiency. Credit cards can simply be swiped and confirmed and then the sale is complete. There is no tangible transference of money between the seller and the client. Making check-out quicker and more competent, resulting in more customers being served faster, consequently more money is made during the day. One can also access their money from anywhere on the globe, (depending on the credit card plan), and they can utilize as much money as necessary up to the credit limit. This makes credit cards very useful for dealing with payments that are not expected.

Manageability is also a positive result of a credit card. It makes it very simple to track purchases and credit card activity. One can go online to their banking website; pay bills, and complete bank account transactions. This is much easier then collecting hundreds of receipts and following up in a checkbook. It also has the capability of providing the user with information via e-mail that an account has this much left before the credit limit, or that there is an error with the account.

Another important advantage of credit cards would be flexibility. Flexibility means the ability to pay for whatever you want (essentially) when you need it. So if one goes on a trip and forgets something, they have money with them in the form of credit in order to buy things. It can be used to cover unexpected costs, and one is given upwards of sixty days to provide the money without paying interest. (BizHelp)

Credit cards really are a very good investment. As long as one pays their credit card bills on time, they pay no interest. Some banks actually offer rewards for using their credit cards. Thus they are paying one to use their card. No loss for the card user. Occasionally cards like American Express offer roadside assistance, and emergency help. (Benefits of Using a Credit Card)

Credit cards also protect against fraud. When one uses a check or a debit card, the money is immediately withdrawn from the account. Thus if one does not want to pay the money, or service was not rendered the person still has your money. Basically there is nothing that one can do. However with a credit card, one has until the end of the month to pay the bill. So the money does not come out of the account. The credit card company acts as a safeguard for the user. (Four Reasons to Use a Credit Card)

There are also several disadvantages that come from using a credit card. One of these disadvantages would be cost. Credit cards in general have very high interest rates; in comparison to loans and alternate means of financing. So people who do not pay their credit card bill on-time end up paying high amounts of interest. This is how the banks make money; they want you to forget to pay your bill so they get extra money.

Another disadvantage would be ease of spending. Ease of spending results often times in over spending due to impulsive purchases. People assume because they do not have to pay their bill today that it will be ok when the time comes to pay it. However people who impulsive buy and procrastinate paying off a credit card bill often dig themselves into holes so deep they need to go bankrupt.

When people use a credit card they are taking out a temporary loan from the bank. That they say they will pay back at the end of the month. However some people will take out new credit cards in order to pay off the debt on older credit cards. Resulting in a circular financial quandary, if they continue to do this they will always be in debt. Eventually they will not be allowed to use a credit card, because they try to take advantage of the system. (Benefits of Using Credit Cards)

Another disadvantage is when people fail to keep track of their spending. This ties into the above point, which explains that people often times spend more money than they have. If people keep track of what they spend by looking online and writing down information, they are more likely to spend money they do not have.

Overall credit cards a very important part of our economy now, and will continue to be. There are many advantages and an equal amount of disadvantages. One must be able to not procrastinate and follow up with their payments, so as to not induce large amounts of interest on a simple expense. Credit cards make spending easier, they provide for a simpler way of spending large quantities of money in a short period of time; so people do not have to walk around with hundreds of dollars in their pockets.

Works Cited

“Benefits of Using Credit Cards.” Money501. Web. 29 Mar. 2011.

“Credit Card Finance – Advantages, Disadvantages and Tips | Business Finance | Money |” In-depth UK Business Advice, Help and Information | Web. 29 Mar. 2011.

Shead, Mark. “4 Reasons You Should Use a Credit Card.” Productivity 501. Web. 29 Mar. 2011.

“Using Credit Cards.” Department of Financial Institutions. Web. 29 Mar. 2011.