Spending more than you earn!!!! Sounds interesting. But how can we spend more than we have in our pocket? The simple answer is to use a credit card but before getting a credit card you must be aware of the advantages and the disadvantages of the card.
Before moving to the advantages and the disadvantages of a credit card let us have a look at what is a credit card? A credit card is a payment card issued by the bank to its customer that enables the cardholder to pay the merchant for the goods and services provided. The card is issued with the promise that the cardholder will pay the money back to the bank on time.
The advantages of using Credit cards are you will get cash Backs, credit bonuses, grace period, helps in improving credit score, the universal acceptance of credit cards the advantages are endless but there are various disadvantages as well debt possibilities, decrease in credit score, Fees and charges, limited usage.
Further, you will read in detail how using credit cards can affect your lifestyle in both negative and positive ways.
Advantages Of Credit Cards
If you are here reading about credit cards then you must want to know the advantages of using the card.
Improve Credit Score
Using credit cards will help you improve the credit score. But how? Let me get clear with this. If you are using credit cards, try to pay your bills on time. Paying bills on time will send the bank the indication that a cardholder is a responsible person and it will reward you back by increasing your credit card score. If you new to the concept then you might be thinking What is a credit score used for? Let me tell you, if you want to avail yourself personal loan then the bank checks your credit score first.
Payment made through credit cards can reward you with cashback. There are many companies that offer cashback in their accounts if you shop with them using a credit card. So when the next time you go shopping from their website or company you have to pay less and you can shop more.
This idea was started first in the US by discovering, they use to give 1 percent credit cashback and soon the idea spread all over the world. There are many companies that offer 2-3 percent credit cashback.
Some people confuse credit cards with loans. There is a basic difference between the two. You need to pay interest on the loaning amount you borrowed but there is no interest to be paid if you are paying your credit card bills on time.
For example, if you purchased a Television set worth $3490. Pay the money using your credit card, now you need to back $3490 to the credit-issuing company with no extra cost. But this is only valid if you pay your credit bills on time.
Universal Acceptance Of the Card
The most important advantage of using credit cards is their universal acceptance. Many merchants want to make payments using credit cards. Let me tell you the simple logic behind it. If you are going for a business deal you are surely unavailable of the money you are going to make a deal in. If you pay using a debit card there are chances that the bank may stop the payment. But the credit card makes you free of all these worries.
Next, if you are traveling abroad and you don’t have enough currency to pay the bills. The credit card will prove to be your best friend there.
Disadvantages of Credit Cards
Using credit cards without proper knowledge and wasting money unnecessarily can lead to many problems. There are disadvantages of credit cards too.
There is a possibility that with the flow you spend too much and later on realize that you are unable to the bills to the credit card company. This will definitely take you to debt and you will be depressed. To avoid these debts from the credit card company, try to pay your credit card bills on time or spend only if you can pay them back on time.
Next, if you are unable to pay the bills on time then the company will charge you the fine which will increase the amount every month. So, you need to careful while spending.
Low Credit Score
Paying credit card bills can affect your credit score in both positive and negative ways. The positive effect has been mentioned above, and not paying the bills on time will affect it in a negative way. A low credit score affects your chances of getting a loan. There are various methods through which you can get home improvement loans on bad credit scores.
Another reason why I feel credit card is not appropriate is its credit limit. Although the credit limit is increased by the company if you are continuously using it and paying your bills on time. What if you have just started using it and want to buy something that is beyond the credit limit by the company.
Fees and Charges
Not paying the credit card bills on time will cost you extra payment every month until you are all up with the debt. This will make you feel like you are in the bars you cant use your card until the payment is done.
The credit card can be of great use but spending money wisely is always recommendable. Using the card wisely can make you feel rich and you can send more than you earn but if you spend so much that you cant pay back the bills, it will take you to debt. If you are using a credit card do let Us know your experience in the Comments Section
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