The Pros and Cons of Credit Cards
What Is a Credit Card?
A credit card is a small plastic card that effectively allows the holder to buy items or services without paying for them at the time, on the understanding that they will make payments to the issuer of the card at a later date.
The card effectively allows the user to have a continuous debt,
To make money the card issuer usually charges the card holder for the service, and also adds interest for any debts that are accrued on the card.
Interest rates are usually relatively high but depend on a number of factors, including the holder's credit rating.
How Are They Used?
Credit cards are commonly used by people to pay for things like gasoline, groceries, restaurant meals, utility bills, and dental and medical charges, as well as for buying products and services online and over the phone.
A credit card can be a very convenient and useful tool when used well, but if used badly, the debts created by the card can be difficult to control, sometimes keeping the user in long term debt, or contributing to severe financial problems for the user.
Below are the main pros and cons of credit cards.
Pros of Credit Cards
Most of the advantages of credit cards relate to their convenience.
1. They are an easy way to access funds and, provided that you pay off your balance owed in full and punctually, the process often doesn’t cost you anything.
2. Credit cards are a useful tool for buying things over the phone, or on the internet. Booking a hotel room in advance, for instance, is much more straightforward with one.
3. They are widely accepted by traders, who are sometimes suspicious of other payment methods such as checks.
4. Credit cards are much easier to carry around than money or check books.
5. Using them can be a good way of building up a credit history, providing you with options for taking out loans or mortgages.
6. Credit cards can be a convenient and relatively inexpensive way of paying for goods and services when traveling abroad.
7. Debt is a normal part of modern life and culture and credit cards reflect that. Many people would not be without one, as they can let you ride out short term lean periods or take advantages of sales.
8. Many automatic payment machines will only accept credit or debit cards and not cash. For instance, when paying for gas in a gas station.
9. Some people find it easier to keep track of their finances using cards rather than cash, especially now that banks and financial companies usually offer phone apps.
10. The points and cashback accrued through credit card use can come in useful over time.
Quotes About Credit Cards
"High bankruptcy rates, increased credit card debt, and identity theft make it imperative that all of us take an active role in providing financial and economic education during all stages of one's life." Ruben Hinojosa
"Social security, bank account, and credit card numbers aren't just data. In the wrong hands they can wipe out someone's life savings, wreck their credit and cause financial ruin." Melissa Bean
Cons of Credit Cards
1. Interest rates on credit cards are usually exorbitantly high. They are generally a much more expensive way of borrowing money when you compare them with other methods, such as taking out a personal loan.
2. As with all electronic methods of payment, your card can be used to defraud you by unscrupulous people, or can be employed as a tool for identity theft.
3. Credit card users can fall into debt easily by continually expanding their debts through habitually spending beyond their means. Critical financial problems may occur when they reach credit limits, or suffer a sudden drop in income through, say, losing their job, falling ill, or undergoing a divorce. These problems can be exacerbated by users having multiple credit cards.
4. “Bargains” obtained by using them often aren’t so great when charges such as interest payments are added into the equation.
5. Although credit cards are undoubtedly convenient, they are too easy in some circumstances. The fact that they are often easy to obtain and use means that users often don’t explore all their options - taking out a loan might be cheaper and more appropriate, for instance. The ease of use can also have negative financial consequences for people who have issues with impulsive behavior.
6. Keeping track of all your debts can become a major issue, especially if you have multiple cards. Three cards means three lots of statements and payment deadlines to deal with each month.
7. Credit cards are only good for improving credit ratings if all the payments made are big enough and paid on time. If the payments aren't kept up, a user's credit rating goes downhill rapidly causing all sorts of extra problems.
Did You Know?
Credit card designs have altered considerably over the years and there are people who collect them.
The early credit cards were constructed from celluloid plastic. Then they were made with a combination of metal and fiber. Then it was paper. Nowadays, most credit cards are made from polyvinyl chloride (PVC) plastic.
There are two fields of study that involve credit cards: numismatics (study of money), and in particular: exonumia (study of money-like objects).
More Quotes About Credit Cards
"What Wall Street and credit card companies are doing is really not much different from what gangsters and loan sharks do who make predatory loans. While the bankers wear three-piece suits and don't break the knee caps of those who can't pay back, they still are destroying people's lives." Bernie Sanders
"I haven't reported my missing credit card to the police because whoever stole it is spending less than my wife." Ilie Nastase