Credit cards are the most common financial instrument among users worldwide. It allows paying for goods and services with borrowed money, maintaining a positive credit history, and improving your life quality.
On the Internet, you will find tones of merchants and online casinos with credit card deposits which make spending extremely convenient and fast. But before you open a credit card, it is important to analyze your financial goals and habits and understand the pros and cons these cards might have. Remember that they are not something you can erase or forget about, as they always come with an interest rate. And below, we will try to help you make an informed decision.
Credit card pros
Credit cards occupy leading positions among other financial instruments and possess many advantages. In this section, we want to discuss the main of them.
1. Building the credit history
A credit score indicates your financial credibility and often becomes a decisive factor for approving a mortgage or any other loan. Building a solid credit history is a must if you plan to have one. To have success, your payments should be on time, and the credit utilization ratio remain under 10 percent. With time, you can move from a secured to an unsecured card after around a year of responsible usage.
1. Helping with large purchases or debts
While we have enough funds to cover the bills and sponsor our daily expenses, paying for a smartphone, car, or house at once might be difficult. That is when zero percent interest cards come in hand. It often goes with balance transfers, and introductory purchase offers help to avoid interest charges and allows for saving hundreds of dollars. These cards allow paying off the debt or loan in parts, and during a particular period, there won’t be any interest percentages at all.
2. Rewarding the expenses
Another great thing about credit cards is that they often come with rewards for loyal users. For example, travel points, cashback, groceries, and more. Think of the things you purchase the most and find an appropriate credit card. For example, the one that rewards petrol or other essentials. Many people can travel almost for free just because they have a credit card with travel rewards. Think of the opportunities that are unlocked! And all you need to do is to pick the right program and maintain a positive score.
3. Solid payment security
It is a well-known fact that debit cards are better for those who avoid loans and prefer sticking to their budget. You pay only with your own funds that are stored on a card. But if the account is stolen or hacked, it becomes a real challenge to return the money. This problem is almost absent for credit card owners because the money is not on the line. Moreover, many card issuers have small charges to ensure that if the funds are stolen, users can return them without any problems.
Credit card cons
While credit cards sound like a great option for each and everyone, there are still several pitfalls to consider. For example:
1. Difficult to manage several cards at the same time
Although owning more than one card is good for the credit utilization ratio, it makes it difficult to analyze the budget and make interest payments on time.
2. It may be hard to control expenses
Unlike credit cards, debit ones allow paying only with your own funds, so you can’t exceed the budget. Those who find it difficult to control their budget or have a shopping addiction, should stay away from credit cards or minimize their usage.
There are around 2.8 billion credit cards in use and the number continues to grow exponentially. People appreciate this payment method for a bunch of advantages: building a credit history, paying off debts, receiving rewards, and more. But it is important to understand that credit cards come with several disadvantages that shouldn’t be ignored. And if you decide to open such an account, be very attentive and take one step at a time to see whether credit cards suit your needs and habits.