Credit cards are a rite of passage for adults, especially for financially independent adults. If you want to have a credit card, you have an unlimited variety of options for a credit card provider. Whether you need extra money for a purchase or get a small business started, credit cards are an excellent way to have additional funds.
Credit cards are known to be one of the most popular payment methods of the consumer. Well, no one can be blamed on this fact because there are more advantages in using credit cards than debit cards. However, credit cards can also cause a financial collapse if you use them irresponsibly.
Stay within your limit
One of the benefits of having a credit card is its ability to build your credit score faster. If you are trying to borrow money, your credit history is one of the things that the lender will look at. Credit cards can help build you a good credit score because the credit card company records every purchase and payment of yours.
The credit card company will also report if you ever miss a payment or if you are paying your monthly installments way after their due date. Yes, the fact that credit card companies record your missed payments may be frightening. However, they can be an asset if you are paying your dues on time. It all depends on the user of the card.
If you are not financially capable, then credit cards may not be a suitable payment option for you. Credit cards are convenient payment options for the standard loan process where you have to get in line. Despite the convenience, credit card companies have a much higher cost of borrowing than the traditional loaning system.
A lot of credit card options include a high-interest rate charged on borrowed funds, service fees, and penalties for late payments. This unpaid balance of yours will increase every month. This means that the more you miss your payments, the more your debt will increase as well.
Despite the alarming increase in your debt once you fail to comply with your payments, millions of people still apply for a credit card. One of the reasons why credit cards are still used to this day because of the security it offers. When your credit card is lost, you can call the credit company to freeze your account to prevent it from being used.
And yes, delayed payments may increase your debt.
However, paying in advance or on time can get you rewards. Many credit card companies offer rewards like cash back or airline miles if you use your credit card more often. The good news is many of these rewards add up quickly as long as you use your credit card.
Credit cards give you additional funds for whatever purpose.
If you love shopping, then credit cards are more accessible than bringing a lot of cash with you. The problem with credit cards is it can cause you to overshop. The finances of millions of people have already crumbled because of the wrong way of using their credit card.
Furthermore, there is a considerable chance of overspending when using a credit card because you would not know how much you are spending by the end of the month, unlike bringing cash where you have an idea how much you have left. Your credit score depends on how you use your credit card and pay your dues.
You are the sole responsible person in paying and spending using your credit card. Being financially capable is not enough to ensure that you can reap from the benefits of having one. If you plan to have a credit card today, you can first check this iChoose infographic to know how to use it properly.