The Advantages and Disadvantages of Credit Cards

Credit cards are a great financial support tool and entail the convenience of buying things now and paying later. Besides many conveniences and security, credit card systems involve certain risks if you are not responsible or careful. These risks involve your credit score, higher interest rates, and sometimes overspending and penalties.

In this article, we share some fantastic credit card advantages but also inform you about disadvantages so you can be varied and use it responsibly.

Credit Card Advantages

Let's start with credit card advantages so you can take full benefit from them.

Convenience

Convenience is no doubt the best of the credit card advantages, as no matter if you are buying online or in a shop, you simply have to swipe. It also provides convenience in terms of paying later equally distributed over many months. You can enhance this convenience further if you pay later with a 0% markup, saving you tons.

Spending Records

A good thing about credit cards, among many credit card advantages and disadvantages, is that you have a complete list of your purchases. You can calculate your spending and earnings and mitigate extra spending. Yearly reports help you understand your expenses better and allow you to make tax reporting much more manageable.

Credit Building

No matter how much you spend, if you are responsible for payments, you are slowly building your credit score. Each time you make a purchase through your credit card, the information is stored in the bank’s database. At the end of each month, your bank relays that information to the biggest credit bureaus. If the credit information is good, every other bank or loan company will have that information. This allows you to take more loans when needed.

On the other hand, if the score isn’t good, you will get higher interest rates, and some institutions will not even allow you to use a credit card.

Protection for the Consumer

One of the best AmEx platinum advantages is that you can dispute the charges you made due to the quality of the product you purchased. Though it does require proper documentation, you still can easily get your money back, albeit it may take too long.

There can also be the seller scamming you or never dispatching your product. Some companies provide you 'Zero liability' in the case of your card being stolen. In this case, if there were any purchasing done, you aren’t responsible. Furthermore, that spent money isn’t marked, and you get a temporary credit to spend, so you aren’t tied down because of that.

An Easy and Low-Cost Loan

There are different cut-off dates for different banks, and if they don't overlap with your salary or payment dates, you have an outstanding loan tool.

What it means is that you can make a purchase when you need even if you don’t have money. Now, as soon as you receive your payment or salary, you can pay off that debt. This option is only good enough if you get to pay off before the cut-off date.

If you cannot return the money by the due or cut-off date, you will be charged an extra penalty, which sometimes is a percent value of what you purchased.

Credit Card Disadvantages

Any risk or cons is an essential part of credit card advantages and disadvantages as they help you ascertain the pitfalls. They also let you know what can happen if you indulge too much.

Overspending Risks

Sometimes, you aren’t careful about how much you spend because you can always pay it later, but you don’t realize that it can make budgeting difficult. This frivolous can cause issues such as you only making minimum payments while penalties and markups keep ramping up. The higher your balances and debt grows, the lower your credit score will get.

Interest Rates

There are a lot of credit cards that allow you to pay off with 0% markup, which supports AmEx platinum advantages in the long run. But if you don’t consider this factor regularly and instead accumulate markup-based payments, you have to pay much more in the long run than the actual worth of the item.

In some instances and credit cards, there may be variable interest rates. Now, even though these rates are regulated and based on the Federal Funds Rate if you are holding a debt, the capital amount may significantly go up.

In the cases where you are using purchases to get more points and rewards and not spending too much, it won't be an issue.

Fees

Most typical fees, such as annual or transference fees, aren’t that much, but others, such as advance loan or overdraft fees, are pretty high. Though they can easily be avoided, it still is a nuisance when you have to pay these fees.

Monthly Payments and Scrutiny

It always seems charming that you can buy anything you want and pay for it later. But even if you are making a 0% markup over a few months, you still have to budget those payments each month.

Furthermore, you do have to check that all these purchases are yours or if there may be an illegal purchase there. While there are tons of credit card advantages, they still are one of the highest targets for scammers and frauds.

Fine Print and Tricky Terms

Most credit card companies use technical jargon that sometimes is difficult to understand for the layman. In these cases, you aren’t entirely sure of deadlines and incurred penalties. Even if you review them carefully, it isn’t a surety that you have completely understood them.

The best option is to call and confirm with customer care if something is difficult to understand. Customer care calls are by law recorded, so you always have proof if you mistakenly are at a loss.

Final Words

Like most things and tools in life, there are always pros and cons. The cons are mostly there because of your mistakes, or you are not careful. With some fantastic credit card advantages we shared, we also mentioned critical disadvantages. This clear information allows you to make sure you don’t get on the wrong side of credit.