Pros & Cons of Credit Cards

It is now entirely possible to go through day-to-day life without handling cash. With the advent of credit cards, paper money and coins have largely become a relic of the past for many people. It’s hard to argue with the ease and convenience of plastic. However while credit cards offer a lot of convenience, they also have a dark side of which you should be aware.

Here are the pros and cons of credit cards.

Credit Card Pros

Used responsibly, a credit card will help you build a strong credit score. If you pay your bill on time and never push your card beyond its credit limit, you’ll be afforded all of the best the credit world has to offer. These include easy loans at favorable interest rates, giving you the ability to leverage your good name to control more money than you’re ever likely to hold at one time.

Additionally, when you use a credit card, you’re putting someone else’s money into play. Thus, if the card number is ever compromised, the majority of your personal assets will go unscathed. When somebody steals your credit card, federal law limits your liability to $50. Even better, many cards offer zero liability protection.

Some credit cards also offer rewards such as cash-back bonuses, airline miles and other perks. You can use your credit card to make purchases just to reap these rewards, then pay it off at the end of each billing period before interest accumulates on the balance. Lots of people get “free” vacations and other luxuries this way.

Credit Card Cons

Irresponsible use of a credit card can get very expensive very quickly. If you don’t pay your balance in full each month, interest accrues and is added to the balance owed. That can easily snowball into an unmanageable situation and your financial situation can get out of control.

Because credit cards are secured only by your promise to pay, issuers charge very high interest rates—often in the neighborhood of 16 percent or more. One must also be careful to avoid fees that can come with credit cards. Further, a lot of merchants (such as gas stations) charge consumers more (or set minimum purchase amounts) when shoppers use credit cards. This is their way of passing along the fees issuers charge them to you.

It’s also too easy to make an irrational purchase when you have a credit card at your disposal. Because credit card spending limits can be exceptionally high, people sometimes feel it’s OK to make a large purchase they would otherwise avoid. Ironically, people seem to forget they’ll eventually have to pay for that exorbitant indulgence. Meanwhile, thanks in part to debt, many American households own less than nothing.

Ultimately, this can lead to situations in which people find they can no longer keep up with their expenses. In those cases, debt negotiation companies like Freedom Debt Relief can help consumers negotiate with creditors to reduce the amount they owe. Still, a far better solution is avoiding overspending in the first place.

To make a long story short, when it comes to the pros and cons of credit cards; they can put a lot of financial power in the hands of consumers. However, along with that power comes the necessity of handling it wisely.

Used intelligently, credit cards can be true blessings.

Used indiscriminately, they can be the keys to the gates of financial ruin.

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