The Pros and Cons of Owning a Credit Card

The Perks…and the Drawbacks…of Using Credit Cards For Purchases.

Over the course of the years, owning a credit card has become something that is more common. If you are someone who is unsure on whether or not to get credit, here are some important pros and cons to consider before you make this big decision.

The Pros:

1.) You Build Your Credit Score.

A great advantage that comes with using a credit card is the fact that you were able to build credit. Building a solid credit history is very important because you need a credit in order to purchase a car, purchase a home or make other big purchases in your life. As long as you open up a credit account and it is in good standing, your credit will be able to improve and increase as the years go by. It is important that you set up a payment plan with your bank that will allow you to make the monthly payments of your card on time. It is important that you learn how to manage your personal finance.

2) Rewards Points/Cash Back

Another great advantage that comes is the fact that you’re able to get rewards. For the most part, owning a credit card will allow you to get some sort of cash back, hotel points or also get gas rebates. Many credit companies provide rewards so that your purchases are subsidized. By signing up to get rewards, you will be able to have a membership with many different parks. The more that you spent on your card, the more likely that you were able to get rewards back.

3.) The Grace Period

Another great advantage that comes with owning a credit card is the fact that there is always a grace period. Having a grace period will be able to allow you to save up the necessary amount of money that you need in order to pay back the credit line every month. Usually, you will have at least 21 days to make your monthly payment.

4.) You Can Make Online Reservations.

Having a card will allow you to make hotel and rental car reservations. Without a credit score, it can become more difficult to rent a car or to make hotel reservations. The majority of hotel companies and rental car companies require a credit line before renting a room or a car. They usually place a hold on your account in case there are any accidents or situations that need to be resolved. It is always recommended to have your credit line tied up to the reservation rather than to have your actual account that is in your bank.

5.) You Have Access to Money At Any Time.

Lastly, a great advantage that comes with owning a credit card is the fact that you are able to use the money and pay it over time. This is the main reason that many people decide to get a credit line. There are times when life can become difficult and financial situations can become worse. Owning a credit line will allow you to be able to make any purchases that you need even if you do not have any money in the bank. Having the opportunity to pay overtime cannot greatly hope you and your financial situation.

The cons of owning a credit line:

1.) High-Interest Rates

When disadvantage that comes with owning a credit card is the fact that there can be high interest rates. The average APR on a new credit card can be around 19%. This is very high, and it is recommended that you discuss the APR before you get a credit line. High interest rates can greatly affect your credit and your financial situation.

2.) Cards Have Annual Fees.

Owning a credit card can mean that there are more fees that you have to pay. On average, a credit company would charge you around $16 all the way to $30 annually. Although this is not terrible, overtime this can start to add up. This is a type of expense that can be avoided if you do not own a credit line.

3.) The Temptation to Over-Spend.

overspending

Having a credit card can also mean that you may be overspending and getting yourself in debt. Having credit does not mean that you should always be spending things on unnecessary items. Many people struggle with overspending and getting themselves more into debt. This can lead to lawsuits and collection agencies.

4.) Managing a Card is a Skill in Itself.

Owning some type of credit card can become something that is toxic as well. If the individual does not know how to properly manage and use the card, chances are that they will begin to overspend and they will lose a sense of reality. Losing a sense of financial situations can worsen the situation overtime.

5.) You’re a Target For Fraud.

Lastly, having a credit card can make you be at risk for fraud. Disputing charges on your card can be very stressful and they can become a hassle. Fraud can really damage your credit score, and this will take up two years in order to get fixed.

Over all, there are many different advantages as well as disadvantages that come with some sort of credit line. It is important that you consider all of the above pros and cons saw that you were able to make the proper decision based on your specific personal finance.