Pros and Cons of Credit cards

Pros and Cons of Credit cards

Usage of credit card has increased much fold in the past few years. Almost all the working populations own one or more credit cards. They have emerged to a position to indicate the status of an Individual-based on the number and the type of credit card a person is holding.

Before applying for and start using a credit card, it is important to understand what are the pros and cons of using credit cards.

Credit cards are like a postpaid version of debit cards. unlike debit cards which you can use only if you already have balance in your bank account. You can use credit cards to make purchases online or offline and later at the end of the billing cycle pay all the dues you have. This novel feature of credit has attracted to own one card.

In addition to all these, there are many offers on credit cards like reward points and Discounts on certain cards all of these attracted many to own different credit cards. But nothing comes without a cost. In addition to all these advantages, there are many disadvantages to using a credit card. In this article, we will list all the advantages and disadvantages of using a credit card.

Advantages of Credit card

1. Easy access to Credit

Credit cards are the most popular and easy way to get access to credit which can use for all your requirements and pay at the end of the billing cycle. You can spend as much as you can within your credit card limit without worrying about the balance in the back and at the end of the billing cycle when the statement of the card is generated, you can pay all the expenses of the month at once by paying the bill of a credit card.

2. Credit Score

Credit cards using will start your Credit score calculation at the Credit agencies. For example, using any bank credit card for the first time will start your CIBIL score and proper usage of credit card will ensure that you have a high credit score. This credit score will help you in getting Loans if required in future at the best interest rates Because banks usually give loans at low interest to people with very good credit scores.

3. EMI Facility

Credit will make you use the feature of EMI facility in very high purchases online or even offline purchases. You can convert any of your high-value purchases into Equal Monthly Installments(EMI) and hence pay a certain amount for the period depending on the value of the purchase. EMI is the most popular and heavily used feature by many people as this is a better option than taking a loan to buy high-value purchases. you first buy the product and then every month pay a certain amount instead of paying the entire amount initially.

4. Incentives and offers

All most all credit card companies try to provide huge incentives and offer for their customer for using their credit card services. These incentives include rewards points based on the usage of the cards and these reward points can be redeemed to cash or can be used to shop online. Huge discount during any sale or offers on products at certain outlets is other offers that are provided for using their credit cards.

5. Purchase Protection

When compared to debit cards, credit cards are even more secure and all the credit companies use a certain level of protection to ensure safety to its users and avoid fraud. This ensures safety to the consumer. And also many credit card companies offer insurance in case of fraud to safeguard yourself in case of any occurrence of fraud.

Disadvantages of using Credit cards

1. Increased Spending

It has been found that in case of having a credit card instead of a debit card, you are prone to spend more than you offered. It has been found that people when to move from using a debit card to a new credit card, usually their spending increases. As credit card payment does not require to keep any balance in the bank account, many users spend more than they afford.

2. Hidden Costs

Credit cards involve a lot of hidden costs like joining fees, Late fee payment in case of late payment, Interest on the late fee amount and other charges. These charges are directly added to your credit card statement and many a time you ignore reading your credit card statement usually paying more than what you have actually spent.

3. Interest Rate

Credit cards interest rate in case of late payment is very high when compared to conventional loan interest. this interest is so high that few companies charge almost 1.5 to 2 times the normal interest rate on loans and in the process, you pay a very high amount.

4. Debt Increase

Using and increase credit card spending will indirectly increasing your future debt. As said earlier, after started using credit cards, people usually sped too much when compared to people who don’t have any credit card. This increase the debt burden on the users. And also the EMI feature also increases future debts for the present purchases.

Responsible Usage

Credit cards pros and cons when compared, it can be safely concluded that the advantages outweigh the disadvantages. they are a good tool to use for your daily spending provided you behave responsibly and controlling your spending based on your limit. Don’t always spend till your credit limit is over. For sure you are provided more credit than you pay. Pay only that much which you can afford and keep a track on spending and review all your spending for overspending when the statement of credit card arrive at you at the end of the billing cycle. By this way, you can make maximum use of your credit cards.