Credit cards can be a huge help if someone should find themselves in a financial pinch, but are they really as helpful as they seem? This article will walk you through a few of the major pros and cons of credit cards. Before deciding whether to accept that credit card offer, consider these points.
Credit Cards Can Provide Money You Do Not Have
Pro: This can be a great way to take care of an emergency. If you have a costly car repair that you can’t afford at the moment, perhaps the Visa in your wallet can take care of it. Having this type of assistance can be a life-saver.
Con: Bills can add up quickly. Maybe you used your credit card to get your car fixed, but you also used it go out to dinner, grocery shop and fill up with gas. While credit cards may get you out of a pinch, remember that you will have to pay those funds back. To control the temptation, some people choose to leave credit cards at home when it isn’t necessary to carry them.
Credit Card Safety
Pro: Credit cards can be a safe way of handling your money. If you should happen to lose it, simply call your provider’s customer care number to cancel the card and have them send you a new one. Immediately cancelling a lost card can prevent any unauthorized spending on your behalf should someone find it and decide to use it. The important part of that, however, is acting immediately. You can monitor your credit with services through Credit Karma and Experian.
Con: Identity theft is a real threat, and credit card carriers must be careful. Unfortunately, retailers don’t always ask to see a person’s I.D. when processing a credit card. The U.S. still relies upon signing for a credit card purchase, but this is far less safe than the process used in Europe. For nearly a decade, European credit cards have relied upon a PIN number system, similar to how debit cards work in the U.S.
Credit Card Interest
Pro: While no one likes to pay interest on credit card balances, paying off a balance over time will improve your credit score. Having a strong credit score can be the difference between getting approved for a new car or home and being rejected. People who allow you to make large purchases through credit need to know that you’ll be able to pay them back. Demonstrating this by paying off a balance over time proves that you can.
Con: Interest can be very pricey. According to Bank of America, Annual Percentage Rate (APR) can vary. A single credit card can actually have several different APRs, and understanding how your APR works is important when deciding whether you should use credit cards. Be sure to pay credit card bills on time to avoid paying more interest than you need to.
When comparing cash and credit, one is not necessarily better than the other. The most important thing to remember about credit cards is that you must be responsible when using them. They can provide a great deal of instant gratification, but remember that comes at a price. If you ever find yourself confused about credit terms, check out this NASDAQ guide of credit card terms to bring a better understanding.
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