Credit cards offer multiple benefits to an average consumer. It’s not surprising to know why so many people get lured in to apply for a credit card. Not only do you get rewards and bonus points for making purchases, you are also able to pay for services and goods when you have no cash in your pocket.
However, there is also a dark side to it. If you fail to use your credit card with caution, you can end up in a pool of debt with fewer chances of survival. When you get in the habit of using a debit card instead of a credit card, you must be able to maintain a solid history and a good credit score.
Here are the pros and cons of using a credit card:
Pros
When you have just cash on hand, you are restricted to in-person purchases, unless you purchase money orders. As long as you have a good score, you can save some good money down the line. Using your card sensibly allows you to build up a decent score. The debt you carry constitutes 30 percent of your FICO score. This is the credit score that most lenders consider, before making any decision.
Not only you get incredible convenience and quick access to cash, a credit card offers you the freedom to explore an entirely new world of products and services.
It is also a great way to pay off unexpected expenses such as getting a roof built or fixing urgent home repair jobs. Credit cards offer some solid protection. You get more security and peace of mind when you go out to shop.
In case somebody steals your card, federal laws limit your liability to $50, when it starts ringing up purchases. Many cards present zero liability protection. We all know how difficult it is to find stolen or lost cash.
Above all, credit cards offer benefits and rewards. Cash back as well as bonus points are among the top reasons why you should use a credit card for making your next purchase.
Cons
Like other financial tools and systems, credit cards also come with a shadow side. Failure to use a credit card wisely can result in challenging circumstances. You can easily pile up excessive debt when overspending with a credit card.
You must be responsible to make wise purchases. It is common to find thousands of twenty-somethings surrounded by a huge amount of debt. Despite the consumers’ good intentions, the balance keeps escalating.
When the interest compounds over time and the debt begins to grows, financial clouds get thicker. If you miss a minimum payment, you can seriously damage your credit score.
Credit cards also come with soaring interest rates. When you pay for a service or any product with a check or through cash, there is no interest to pay off later.
Bottom Line
We all love to have credit cards because they make us feel richer than we are. But you must be capable of handling all expenses with caution, so you never regret using your credit card.