Last year my credit card was stolen after I dropped it at a gas station. By the time I realized it was gone, someone had taken a joy ride with it- for gas, groceries, and a load of booze. I guess that this someone saw the chance to drink all day on my tab!
I was very fortunate that my card was not maxed out. Less than $400 was spent during the three hours my card was missing. But this has given me a different perspective on the pros and cons of credit cards.
Pro: Easy to Use
Just swipe and sign! Nothing easier than that, right? Using credit cards is fast, convenient, and does not usually require a form of identification to prove that you’re you.
Pro: New Payment Methods are Easy
You can pay online, by phone (just note that there’s usually a charge if you have to talk to an operator; if you can use the menu instead it’s usually free), or the “traditional” way- through the mail by check. If you are running late on your payment, a phone or online payment can be made and can help you avoid late fees.
Pro: Insurance Policy for Emergencies
If you have a credit card on you when you have an emergency, you can easily pay for food, medical expenses, gas, or any pressing need.
Pro: Many Companies Offer Rewards.
If you use your card enough, you can save up rewards points to cash in on gift cards or gifts of any kind. Con: Too Easy to Use
Credit cards are so easy to use that anyone can use them. This means that if your credit card gets lost or stolen, a dishonest person can quickly swipe and sign your name to purchase loads of items (such as booze). Some credit cards now have a photo on the front to help cashiers identify you and help prevent theft. This is a great addition to the standard credit cards; however there are still several purchases that can be made without having to see anyone face to face. Examples include getting gas, purchasing fast food at some drive-through windows, and online purchases.
Con: Costs Add Up Quickly!
Remember the days of check writing for all expenses? If you were paying attention in High School Business class, you recorded all of your expenses and kept a close watch on your account to make sure you didn’t overdraft. With the advent of credit cards, many of us do not keep and record our receipts, rather we wait until our statements come to see how much further we have placed ourselves into debt. It is something that we should all consider: save your receipts, add up your expenses, and pay attention to what you are buying month to month. This way you can avoid balance surprises.
Con: Rewards Can be Deceiving
Adding up points requires making purchases, and for some rewards programs it requires making the right type of purchases such as travel or flowers. This means more of your money spent to get a reward that you could have purchased at a store in the first place.
Con: Affects Your Credit
Too much available credit or high balances on too many cards can adversely affect your credit score and make it difficult to purchase a house or car, or refinance. So while it may be nice to have that credit available, it could hinder your future planning!
Next time you pull out your credit card, think for a minute about whether the pros of using it outweigh the cons. And be careful not to drop your card at gas stations or you could be buying booze for someone!