We live in a society where we have become dependent on plastic.  Credit cards are an essential part of our lives.  When you look at the news, the unemployment numbers are staggering.  People are living paycheck to paycheck and they can hardly pay their bills each month.  It is easy to use a credit card for the following reasons:

Use of Credit Cards

Everyday expenses such as daily necessities: food, clothing, entertainment, etc.  These are the basics for everyday living.

Loss of income.  Losing a job can force you into using a credit card.

Unexpected expenses.  We all have those.  They seem to come from nowhere and hit you real hard.

Emergencies.  An emergency can happen overnight to anyone. It can be anything such as: health, weather or financial.

Easy to use.  Lets face it folks, credit cards provide convenience.  They are easy to carry and we don’t have to shell out the funds right away.

Credit cards can also provide the user with benefits

  • It can help you build a strong financial history.  If you want to own a home, you need to have an established credit history.  Owning a credit card and paying on time and in full will help you do that.
  • Many times credit cards will offer a rewards program such as: points, (you get a certain number of points every time you use your card. They entice you to spend so that they can offer you  gift cards and other rewards).
  • Frequent flyer miles - Imagine some cards make it easy to travel. You might even get a free airline ticket.
  • Cash back. On purchases. For example, if you have 2500 points, the credit card will give you $25 cash back that you can have sent to you or you can put it on your bill.

Disadvantages of credit cards

  • Easy to use.  You don't have the money but, you see something you really want.  You can overspend.
  • Credit cards have extremely high interest rates.  When the Fed lowers interest rates, that has nothing to do with the credit card interest rates.  Credit cards can charge you an exorbitant interest rate such as 30% and it's perfectly legal.
  • They can change your due date without notice. So check your bill carefully.
  • They can change the amount due without notice. Always be aware.
  • If you miss a payment or make a late payment they will destroy your credit because this is reported to the 3 credit bureaus (Experian, Transunion, Equifax). It impacts your fico score.
  • The possibility of getting into debt is real.

Credit cards allow you to defer payments on purchases made now into the future.  Credit cards can also help you learn valuable lessons.  It teaches you to become responsible with your credit.  As you strive to make a brighter and more prosperous future you must also be mindful of how credit cards can hurt you if you let your guard down.

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2 thoughts on “Benefits & Disadvantages Of Credit Cards”

  1. Careen says:
    October 6, 2020 at 2:05 pm

    The big difference between the two being that a credit card will allow you to build credit. If you pay off the balance of the credit card on time you end up paying no interest and earn cash back and other perks. You don’t get the same benefits from a debit card. If you treat a credit card like it’s a debit card and treat the credit like it’s money in your bank and not a blank check the credit card is just objectively the better option.

    1. Financial Adviser says:
      October 6, 2020 at 11:25 pm

      Thank you so much for your comment. I agree…

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