For most cardholders, credit cards can be your ticket to a wide range of great spending opportunities such as shopping, business, and travel. But for others who will often misuse their credit cards, owning a credit card may lead to financial hardship in the long run. Aussie Finance Blog gives us a preview of the perks and disadvantages of owning a credit.
Convenience: A credit card will save you the trouble of finding a nearby ATM, and you will need to carry less cash with you.
Statements and records: You can easily keep track of expenditure, receive ongoing bank statements and retain records for tax purposes.
Cash flow: A credit card is a convenient way to obtain a cash advance at a time when you need it most.
Build a good credit rating: Having a history of controlled credit card use will supply banks and other lenders with a good impression of your money handling skills. It will also help negate past bad credit history.
Overuse: Credit cards can make you feel you have an abundance of ready cash. A credit card used inappropriately can result in overspending, leading to repayment difficulties.
Extra paperwork: It’s not uncommon to lose track of spending. You will need to keep receipts in order to check them against bank statements.
Missed payments: If you miss a payment, you may end up paying much more than required for your purchases.
High interest rates: High interest rates can often outweigh benefits. Many purchase savings offered by credit cards are also available elsewhere.
A cycle of debt: Customers sometimes obtain a new credit card to alleviate debt on their present card. This approach leads to a cycle of debt, with increased monthly payments.
Credit card teaser rates: Companies lure customers with attractive introductory interest rates. Although initially helpful, the expiry of the introductory rate is also the start of a new rate which can be much higher and difficult to manage.
Verdict: Are credit cards as bad as they seem? Credit cards are like tools, if you use them correctly and responsibly there won’t be any negative consequences. What do you think about credit cards?