Credit cards are an excellent tool when you are low on cash. Undeniably they are convenient and easy to use, especially if you are planning to buy something expensive. Credit cards give you the freedom from carrying large sums of liquid cash in your purse every time you go shopping. However, no matter how convenient they are, using them blatantly can add to your financial troubles. Therefore, one needs to understand the advantages and disadvantages carefully before even applying for one.
Pros and cons of credit cards
Ever since the evolution of plastic money, people are attracted to it. With companies offering more and more benefits on the cards, they are becoming quite popular, especially amongst the younger generation. Credit cards have gained huge popularity after demonetization in India. People are scared to take out cash from ATM’s and want to rely on plastic money as much as possible. But owning a credit card requires you to be responsible enough to spend it wisely, otherwise, it can sink you in the financial crisis. Hence, it is always a good idea to gain some knowledge before start using it or even applying it.
Power of purchasing – Imagine you want to buy a piece of furniture or an expensive designer dress which was not possible before because you didn’t have enough money in your bank accounts to afford your dream product. You always had to adjust with your dreams because of lack of finances. But now with a credit card in hand, you can easily purchase the product without making any adjustments. Just swipe the card and payment will be made instantly.
No geographical boundaries – Credit cards are accepted worldwide. Whether it’s a retail store or an online store, every merchant understands the power of plastic money. Hence, every small or big store today is accepting cards. Credit cards companies offer international cards as well that can be used overseas or on any online overseas store. You don’t have to go physically to a place to be able to purchase your favourite item.
Rewards and cashback – Credit cards give you the opportunity to earn while you spend. Apply for a card that has tie-ups with popular stores because this can help you earn reward points whenever you shop from these stores which can be redeemed later. For people who travel a lot, they can go for travel cards. These cards help in accumulating miles that can be used on your next ticket purchase. Reward points act as discount coupons which can be used in your expensive purchases. So, why not earn while spending.
Builds credit – using your credit cards responsibly can help you build a good credit. All you need to do is to make regular purchases and pay off the entire debts timely. Good credit is very useful in today’s time as it helps creditors in gaining confidence about you and offers you more credit in terms of loans or cards. It can actually improve your credit rating.
Security – Credit cards definitely are more secure than cash. In case of theft, the user can call up the bank and deactivate the card to stop any fraudulent activity. Cash does not provide that kind of security. Once stolen, nothing can be done. With security procedures in place today, it has become difficult to do a credit card theft.
High-interest rates – One of the biggest disadvantages with a credit card is that they have high-interest rates. If you fail to repay the amount in full, the APR (annual percentage rate) can drag you down with debt. The best way to avoid it is by paying the dues in full or at least pay until the grace period is active. Alternatively, if your credit rating is good, you can apply for 0% interest credit cards.
Spending behaviour – Though credit cards give the luxury to purchase anything anytime anywhere, it also makes it easy to spend recklessly. People often spend on cards for things they don’t even need it. But if you are not careful, you can get into a huge amount of debt. Hence, it all boils down to use your credit card wisely.And sometimes it does not work for you, many credit cards are there which do not provide you any cashback or reward point on spending, if you see PNB credit cards then you will realise most of their credit cards are not providing any premium benefit and those are also not meant for travellers or fuel consumers and if we consider these two aspects most of our spending is done in these occasions.
Late payment charges – This is applicable for people who fail to pay the dues on time. Credit card companies levy heavy late payment charges for skipping timely payments. These charges are high and can quickly accumulate into huge debt.
Credit rating hampered – People who fail to pay the bills timely or carry a high balance for a long period of time, it can have a negative impact on the credit scores. Bad credit ratings lead to future financial problems.
Therefore, it is important to understand, how to spend wisely on credit cards. Any kind of leniency can put you in a huge amount of debt. But, if you use them carefully, they can act as an asset for you.