Deciding to use and obtain a credit card is a big decision. Many people carry and use credit cards regularly, but it is important to consider the benefits and disadvantages carefully. After identifying the pros and cons of using consumer credit, you can decide whether it makes sense to use a credit card.
Advantages of Using Credit Cards
Credit cards allow you to pay for items without actually carrying large amounts of cash. Additionally, as more people shop from the comfort of their homes online, credit cards provide an easy way to pay when cash is not convenient to complete the transaction.
Credit cards are perfect for emergencies when you may have to make a payment and do not have sufficient cash. For example, if your car breaks down you may need to pay towing expenses.
Most people need to borrow money for a home, car or other large purchase at some point during their lives. Lenders like to lend money to borrowers who have favorable credit histories. Some lenders want to be able to view an identifiable credit history before lending you money, so if you have never used a credit card it can be difficult to get a loan.
Paying with credit makes it easier to cancel a transaction if there is a dispute. For example, if you have household repairs and the contractor did a poor job and refuses to fix the problem, it is easier to cancel the payment on a credit card until the issue is resolved rather than get your cash back.
Some credit cards have perks or incentives. They may offer points that can be used towards prizes, hotels, college tuition and many other items.
Credit card statements provide a built-in record of your expenditures.
Disadvantages to Using Consumer Credit
It is easier to overspend when you use a credit card. When most people pay with cash, they are attuned to the amount they are spending and are more likely to keep within their budget.
It is possible to have a credit card stolen while it is still in your possession. Situations have occurred where credit card numbers and expiration dates have been stolen. However, credit card companies usually alert you about unusual transactions.
Credit cards have high interest rates if you carry a balance. If you are unable to pay your monthly charges in full it can be easy to accrue mounting debt. Some credit cards also have late fees or other charges.
Paying with a credit card may allow certain items to be automatically renewed by sellers unless you personally remember to cancel the expenditure the subsequent year. Sometimes magazines or other services will inform you that the item will be automatically renewed so unless you scrutinize your statements very carefully you may pay for items you do not want or need.
Everyone handles personal finances differently. While many people enjoy the convenience of using credit cards, it is important to use them responsibly. Evaluate the pros and cons of consumer credit so you can make the best choice for your spending habits.