Advantages and Disadvantages of Credit Cards

There are some people that really rely on credit cards and other people that refuse to use them at all. This is because people have different opinions on them and using them. It is worth knowing a bit more about them and how they work so that you can make an informed decision about whether there are a sensible thing for you to use or not.

A credit card will allow you to buy items and then not pay for them for up to six weeks, until you get a bill. When you get your bill you will have the choice of paying back everything that is owed with no charge, or paying off less than the full amount with an interest charge. There will be a minimum amount to pay, which usually covers the interest and just a tiny bit more. The interest on a credit card can be fairly high compared with other types of borrowing, but it is convenient as you do not have to negotiate every time you want to use it and most shops will accept them.

Many people like to use them for online purchases as they add a level of security. Credit card companies tend to insure purchases, so if you buy something online and it does not arrive or is not fit for purpose and the retailer does nothing about it, you can claim through the credit card. The card also does not have a direct link to your bank account so it is more difficult for your bank account to be hacked compared to using a debit card.
Credit cards can also be a very convenient way of getting some interest free credit. If you set up a direct debit to pay off the full balance each month, then you will be able to shop during the month and not pay for the items until you get the bill. This means that in theory you could be getting interest on the money as savings for those weeks. With interest rates so low and current accounts unlikely to offer interest, this may no longer be the case for everyone. It can still be easier though to manage your money, if you spend everything on the card and then arrange for it all to be paid when you get paid at the end of the month.

However, some people manage to get into difficulties when they have a credit card. It can be easy to spend a lot of money on it without keeping track of how much and then when it comes time to pay the bill, there is not enough money to pay it. One way around this is obviously keeping a good track of your spending, perhaps by using online statements or just noting down what you have been buying.

Some people get tempted to spend more than they normally would because of having the credit card. They feel that as they have the money available there to spend it means that they can and so they buy lots of things and think about the consequences of that later. This can get them into trouble if they keep spending money and then find that they do not have enough money to pay it in full. Of course, with a credit card you only have to pay back a minimum amount and so if they do this then they will have to pay interest on the debt. If they continue to not repay more than the minimum amount of debt then they could end up paying a lot of money in interest payments, more than they would have been prepared to when they first bought items on the card. It is worth adding up how much you are paying in interest as that could motivate you into not spending so much on the card or paying off more of the outstanding balance.

Some people get more than one credit card and then spend a lot of money on all of them. This can lead to even more problems as there are lots of bills that need paying and thinking about. It can make repayments more difficult as well because of the mounting interest payments.

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