Credit cards have been around since the early 1900s and won’t be going away anytime soon. The convenience of owning a credit card as an alternative to cash is second to none — as long as you pay your bill on time. Here are some of the pros and cons of credit cards
- It’s safe
- Can be used as a substitute for cash
- Allows you to establish a credit history
- Many credit cards have a 20 – 25 day grace period
- Allows the cardholder to make emergency purchases (unexpected auto repairs, last-minute airline flights, home repairs)
Carrying a credit card is the easiest way to establish credit. In most instances, you don’t have to put any money down and it’s the easiest credit to obtain. Credit cards are also safe because you can carry your card instead of cash and if your card gets lost or stolen, you’re not responsible for any unauthorized purchases as long as you contact your credit card company.
- Costs money
- Balance must be paid back
- Purchases must be paid out of future income
- Temptation to overspend
- Failure to pay can lead to financial problems and establishing poor credit history
Let’s face it; there are disadvantages to carrying credit cards. Carrying a balance costs money later on. How much it will cost you depends on how fast you pay down your balance. In my opinion, the biggest disadvantage of carrying a credit card is the temptation to overspend. I’ve been there, done that, and my poor spending habits led to charge-offs and a negative credit history years ago.
Since then, I’ve improved my credit by improving my spending habits and paying my credit card bills on time. For instance, I based all of my day-to-day purchasing decisions on whether or not I’ll be able to pay that transaction off when I get my paycheck. If I can’t, I simply won’t buy it. With the exception of emergency purchases, I treat every purchase that I make with a credit card as if it were a cash purchase. In other words, if I charge it, I’m going to pay it off at the end of my pay period.
If you’re applying for a credit card, I’d advise that you pay off your balance monthly to take advantage of the no-interest grace period. If you must carry a balance, make your payments on time every month.