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Credit Card Benefits and Drawbacks
Credit cards have both benefits and drawbacks. It is wise to
consider both before applying for a credit card. While they can
be very useful, credit cards can also be risky. Even people who
are usually good with their money get into trouble with credit
cards. A credit card can be useful, but may also end up putting
you in a difficult financial situation if misused.
Here are some of the benefits of credit cards:
Withdraw cash 24 hours a day, anywhere in the world.
Buy online. It is the quickest and easiest way, and you are
protected against credit card fraud.
Repay in regular instalments. Typically, these incur
interest.
Usually, there is an interest-free repayment period, which you
can use to repay your debt in full, interest-free.
One of the main benefits of using a credit card rather than a
debit card is the protection provided by the Consumer Credit Act.
This says that if you have problems with goods or services you
can get your money back from the card issuer if you can't get it
back from the supplier.
Some cards provide purchase protection insurance, which pays
out if something you have bought with the card is lost, damaged,
or stolen within ninety days of the date of purchase.
A credit card can cost nothing - if you pick a card that
doesn't charge an annual fee and you always pay the bill in full
every month.
A credit card can save you money if you choose one that earns
you cash every time you buy something. How much cash you get back
is calculated as a small percentage of the amount you have spent
on the card. Some cards offer incentives other than cash - Air
Miles or shopping vouchers, for instance.
Even if you do not pay your monthly bill in full, a credit
card can be cheaper than running an overdraft on your current
account, especially if your bank charges a monthly fee as well as
interest when you overdraw.
Using a credit card can work out cheaper than using
traveller's cheques or foreign currency to pay for things abroad.
This is because the exchange rate used by card companies to
convert foreign spending into sterling is better than normal
tourist rates. However, because of credit card charges for cash
withdrawals, a debit card is better if you want to use plastic to
buy currency, whether over the counter or from a foreign
cash-machine.
You can give to charity for free if you sign up for a charity
credit card.
Credit cards are often cheaper than loans for short-term
borrowing. You pay interest on the remaining debt, not the full
amount - and there are no early redemption penalties.
Credit cards offer flexibility to match uneven income and
expenditure patterns: you choose what to pay off each month,
between the minimum and the total outstanding.
Their consolidated accounting enables one cheque to settle
multiple transactions - while all appear neatly on one
pre-prepared statement each month.
There is an automatic 'interest free' period per statement
period.
Credit cards enable remote purchasing via the internet, by
telephone or mail order.
Credit cards can include additional benefits like insurance
cover on purchases, cash-back, AirMiles, Nectar or Reward points,
and holiday discounts.
Here are some of the drawbacks of using a credit card:
Credit cards can be unnecessarily costly.
Credit cards may be expensive for cash withdrawals
Credit cards may be expensive for foreign currency
purchases.
Their credit limits can be insufficient for your
requirements.
They encourage a 'pay now, worry later' mentality and make it
too easy to get into debt.
Credit cards are very open to fraudulent use.
You may freely reprint this article provided the author's
biography remains intact:
About The Author
John Mussi is the founder of Direct Online Loans who help UK
homeowners find the best available loans via the http://www.directonlineloans.co.uk
website.
MORE RESOURCES:
Credit - Google News
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