Benefits of Using Credit Cards – Pros & Cons

Since it is simple & way too handy for their pay-back opportunities, credit cards have become an integral part of our lives. Although credit cards have a bad reputation, they may be a valuable financial tool when used correctly. The discounts, incentives, and bargains offered by a credit card are unmatched by any other financial product, and they promise a jackpot for the savvy consumer. Different types of credit cards can also become debt traps if not used carefully or spend more than your affordability. In todays world, credit cards are a must.

So, if you are a newbie, here’s a rundown of the benefits and drawbacks of your small plastic card.

Advantages of Using Credit Cards

Understanding the numerous benefits of utilizing credit cards is critical to reap their full benefits.

Improve your credit score

Credit cards, when used correctly, may assist you in building credit. Building credit usually necessitates the use of credit. Benefits of having good credit might include lower interest rates on mortgages, vehicle loans, and credit cards, among other things.

Earn incentives

Credit cards can provide you with benefits in the form of cashback or points just for spending as you normally would. Many popular credit cards also offer sign-up bonuses that reward a high amount of points if you satisfy the spending restrictions within the time frame provided.

Anti-fraud measures

Credit card providers, in many circumstances, have measures in place to assist you and your transactions from credit card fraud. Call your credit card provider if you see any charges you don’t recognize. If you cannot locate your card, report it as lost or stolen as soon as possible.

Under the Electronic Fund Transfer Act, debit cards provide comparable (but far more restricted) safeguards. If it is reported that a debit card has been lost or stolen before any unlawful charges are made, the cardholder is not liable for the unauthorized payments. If it is reported within two business days of the cardholder discovering their card has been lost or stolen, the loss is only limited to $50.

For example, you may be liable for up to $500 in unauthorized charges if you report the card as lost or stolen more than two business days but less than 60 calendar days after receiving the statement indicating the first unlawful use. However, your responsibility might be infinite if you delay more than 60 calendar days after receiving the first unauthorized use statement to report the loss.

Credit cards, on the whole, provide a considerably more vital safeguard against fraudulent use than debit cards.

No hassle of carrying Cash

A credit card is typically more convenient than Cash, and it takes up less room in a wallet than a bunch of banknotes.

Credit cards may be kept in your pocket at all times, ready to use whenever you need them. Furthermore, if you misplace your card, your issuer may mail you a replacement. That is not the case with money.

 Keep track of your spending.

The issuer tracks and records all purchases made with a credit card. Understanding your spending is much easier when you have your transaction history, including the names of merchants, amounts spent, and dates. This is far easier than tracking every cash transaction on a ledger.

Additionally, numerous apps use your spending to help you create budgets, manage subscriptions, and obtain a better knowledge of how you spend money in general. However, in order for the programs to work, you must keep track of your spending. A digital record may frequently be simply connected to the software, allowing it to operate on its own.

Perks

Most credit cards often come with a slew of benefits, like fraud protection, price protection, and extended warranties.

Credit cards with travel advantages frequently contain rental vehicle insurance, roadside assistance, and lost or delayed luggage insurance, among others.

Beside the benefits, the Credit Cards have some drawbacks if not used wisely.

Charges and interest

Overspending can result in a balance being carried, resulting in interest levying on that debt. Interest (and fees) can quickly increase a balance to the point of being out of the spender’s control.

In addition to interest, many credit card companies levy fees for late payments, balance transfers, cash advances, and overseas purchases. Some card companies even demand an annual fee merely to use the card.

Paying out your amount in full by the due date every month is the most excellent method to prevent interest and many of the fees that will get you into trouble. If that isn’t possible, make at least the minimum payment on time to maintain your account in good standing.

Credit scores

Improper credit card use may harm your credit score, reducing your chances of receiving the best rates on (or even being accepted for) mortgages, auto loans, and personal loans.

Paying your bills late, not paying your bills at all, and utilizing too much of your available credit are all habits that can harm your credit score. Other additional elements contribute to credit health, but some are nearly directly related to the usage of credit cards.

Setting up an autopay system for at least your card’s minimum monthly amount will help you avoid missing a payment accidentally.

Just make sure the source account has enough money to cover the payment; otherwise, you may have to pay overdraft penalties, which might place you in a worse situation than before.

How Do You Utilize a Credit Card Correctly?

Reading the tiny print on a credit card might feel like attempting to interpret a foreign language. While the most relevant card facts are often structured in an easy-to-read Schumer box — a breakdown of a credit card’s expenses — other information may be buried in a pool of industry jargon.

So, here are some essential tips for working out your credit cards. Hopefully, if you follow these steps, you won’t be in trouble.

• Please read the fine prints on the card to make sure that you are informed of all the fees and terms that apply to your card.
• It would help if you did not spend more than you think you can afford to repay.
• Avoid charging everyday items to your card so you can keep track of how much you’re spending.
• Check your credit limit regularly and cut back on spending after you’ve reached 40% of your available credit limit.
• Also, to prevent paying interest on outstanding card balances, choose an EMI option for significant purchases made with your card.
• Never forget to maintain at least 40% of your credit limit available for emergencies.
• Plan your purchases and only use your credit card for pre-planned purchases. Avoid using your credit card for impulsive purchases.
• To prevent interest costs, attempt to pay your credit card payments in full each month.
• Never miss a card payment since it will increase charges and a hefty penalty.
• In case, you’ve overspent on your card, contact your bank. They can also assist you in developing a repayment plan with a fixed rate of interest to keep you from falling deeper into debt.
• Please use the advice provided above to avoid credit card debt traps and enjoy a stress-free future with your credit card.

After following all these steps & if you make well-planned decisions, you can find a way out with your credit cards.

Bottom Line

As with other things in life, there are advantages and disadvantages to using credit cards. If you’re careful about how and when you use your plastic, a credit card may be a valuable financial tool.

Credit cards may cause more harm than benefit only if you let your spending get out of control and are disorganized when handling payments and accounts. So, it is very important to carefully handle such an important financial tool in order to reap the most of it. If you, by now, have decided to apply for a credit card, make sure you choose the best one for you.