Credit cards are a handy tool for using them wisely. There are pros and cons, just like any other financial product. Many first-time credit card holders end up with low credit scores or high debt because they don’t know how to use their credit cards properly. This can result in significant debt and financial burdens.
Here are some credit card advantages and disadvantages so you can make an informed decision on whether registering for a credit card is the right choice for you.
Advantages of credit card
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Convenience
Shopping with credit cards has many benefits because you can avail yourself of many rewards, cashback, milestones, and student discounts offered by credit card holders.
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Credit boost
A significant advantage of credit cards is that several businesses worldwide accept payment from a credit card, especially if it is from a well-known one like Mastercard or Visa.
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Protection
Credit cards provide you with security in uneventful circumstances like when your credit card is stolen. In such cases, you can quickly secure your account by a fraudulent claim and your credit card company will help you reverse the charges.
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Spread out the costs
Do you need to make a big purchase? A credit card lets you pay over several monthly instalments. This can help with budgeting and won’t leave a massive hole in your finances.
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Debt
Are you already paying off debts? You can use a balance transfer credit card to reduce your interest payments to help you to clear the debt quicker.
Disadvantages of credit card
A credit card also has disadvantages, such as increased interest, late payment penalties, and varying fees.
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Credit damage
The accrued interest on a credit card refers to the interest fee when you cannot pay your balance off every month. And the other, late payment penalties are charged when the payment is late. They can reach staggering heights too, so if you can pay on time, you should consider it before getting yourself a credit card.
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Extra fees
Different fees depend on your credit card type or the limit. And before getting yourself one, make sure you know all about those because you wouldn’t know where your money is going when the fee is credited.
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Limited use
Credit card providers might charge you extra for free things with a debit card, such as withdrawing cash from an ATM or buying things overseas.
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Credit card fraud
Credit card frauds are standard, time-consuming, and stressful. Many fraud schemes target credit cards because scammers use clever skimming devices, phishing techniques, and other tricks to steal credit card information and money.
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Overspending
This is the classic downside for people who can easily get carried away. Your credit card can help you track your budget, but it can also be the reason for your debts.
Lastly, it’s essential to consider the pros and cons based on your circumstances before you go for a credit card.
