Everyone has heard the horror stories about credit cards and America’s ever increasing reliance on them. Demonized in most articles as a burden to the average American, a tool to steal money from the poor, and a tempting tool that will drive America into bankruptcy. So are they really that bad? Is it the credit card’s fault or is it the user’s fault?
Credit Card Concerns
Makes impulse shopping easy : Many shoppers view credit cards as free money and they use them like the bills will never come! Credit cards have the negative of making impulse purchasing easy and hassle free (at least for the short term).
Increased costs: Credit cards don’t cost the consumer any upfront costs when they are used (putting any annual fees aside). However, once you make a late payment or miss a payment your consumer costs will skyrocket! Late fees can vary but can quickly escalate to 20, 30, 40, or even 50 dollars per incedent. In addition if payments are not made in full each month consumers must pay the interest on any purchase they made on the card. That can add 10% or more to the cost of the items!
Debt : The ease of credit cards can also lead to an otherwise smart consumer overbuying and starting a perpetual debt cycle. Adding in the interest and other charges that accompany credit card debt getting out of the hole can be increasingly difficult.
Credit Card Benefits
Ease of use : Just as that ease of use can be a detriment it is also a huge positive for credit cards. No longer do we need to walk around with large sums of cash on us, just one small simple card is all we ever need. The convenience of not having to go inside the gas station, of not fumbling to count bills, of barely even needing to sign for many smaller purchases make credit cards quick and convenient.
Online Shopping : Related to convenience but in today’s online world not being able to do business online is a huge setback. I do a huge portion of my shopping on Amazon.com. Doing that without a credit card would add a considerable delay and hassle to me.
Rewards : Plain and simple this is my favorite thing about credit cards. Most of the cards I use earn me some kind of points, either cash back points or dollars to a store. As I always pay my bill off each month, therefore not incurring any finance or late charges, these reward points are free money to me! With 5% cash back I am actually just saving 5% on every purchase I make using a credit card. Of course, the secret is to not incur any charges when using the card.
Increasing your credit score : Having and using a credit card helps to build a credit history. Most believe a long solid credit history is the biggest factor in increasing your credit score. By getting a card early and using it properly you can increase your credit score which will lead to a host of other benefits.
Useful or Useless:
At the end of the day credit cards offer a number of benefits that any consumer can take advantage of. As with every decision in life it is up to the person to decide how they will use that card. Used improperly a credit card can be a tool to drain a consumer of their funding and freedom. Used properly, a credit card is another great tool in the consumer arsenal.