The Risks and Rewards of Credit Cards: A blog that discusses the good and bad of carrying a credit card balance.

Credit cards have become indispensable. We can use them to make purchases without cash or buy something from a remote seller without waiting for a check to arrive.

Consider the benefits and drawbacks of credit cards before deciding whether or not you need them.

Benefits of Credit Cards

They are easy to use. Most places accept credit cards, so you don’t need to stop at an ATM before leaving.

Pay Later

You can pay off your balance over time. Pay off your credit card bill in full monthly to avoid fees and interest, except for charge cards, which require full payment to maintain good standing.

Useful Reward

Some cards allow you to earn rewards that can be exchanged for cash or gift cards. More credit card use equals more rewards.

Low Entry Rates

Many credit cards offer 0% APR on purchases and balance transfers for six months or more. To avoid paying interest, you can use your card initially and pay off your balance over time.

Security Features

Credit cards are safer than checks. Someone could drain your checking account if they gained access. If your credit card is stolen, you must wait for the card issuer to resolve the issue, but you will not be cheated.

Billing Errors

You can refuse to pay for billing errors (as long as you dispute the charges in writing). Also, if you discover a mistake in your statement, you can discuss it with the credit card company.

 

Credit Card Drawbacks

Despite the many advantages, some drawbacks to using credit cards may deter you.

Your Future Income Drops

Using a credit card or any other form of debt reduces your future income because you are borrowing money. Therefore, you must set aside a portion of your future earnings to maintain good credit.

Interest, Fees, and Identity

Late fees will be assessed. In addition, fees are added to your account. 

Debt and Life

Using a credit card increases your debt. Depending on your situation, your credit card’s interest rate and usage might add up to hundreds of dollars in annual fees. In addition, your debt may quickly rise if you pay the bare minimum while continuing to make purchases. 

Utilities and Responsible Use

Credit card debt is a never-ending cycle that is difficult to break.

 

Finally, credit cards can be your best or worst friend. It can be both useful and dangerous.