Name: Meby P.

Lamoste Section: MMW-J2

Advantages of Credit Card

1. A credit card is safer than carrying cash. While there’s only a small chance of having lost or
stolen cash returned, a credit card can quickly be cancelled if you lose your wallet. Most
financial institutions also have security processes in place to protect you if your card has been
lost or stolen or if you suspect your account has been used for a fraudulent transaction. If you’re
in any of these situations, make sure to contact your bank to report the issue as soon as
possible.
2. A credit card can build your credit rating. Your credit card account details and payment history
make up a key part of your credit score. If you keep your account in good standing, this
information will help you build up a good credit score, which could increase your chances of
approval for other products such as car loans or a mortgage.
3. You can get interest-free days. If you pay your balance in full before the statement period ends,
you can be rewarded with interest-free days on future purchases for a set period.
4. Earn rewards points when you spend. Rewards and airline credit cards allow you to earn
reward points on every dollar you spend on eligible purchases, such as the groceries and gas
costs. Earn reward points to redeem with the bank’s rewards programs for perks including
flights with partner airlines, products from the rewards store or cash back with rewards credit
cards. On the other hand, airline credit cards let you earn flights with specific airline loyalty
programs.
5. Request a chargeback if you’re unhappy with a product or service. Ask for a chargeback
through your credit card company if you have a dispute with a merchant, either in-store or
online.
6. Credit cards work in any currency. Although currency conversion fees usually apply, you can use
your credit card overseas to make purchases in a foreign currency. There are even credit cards
that waive fees for international purchases, which could be useful if you often shop at overseas
online stores or have an international holiday coming up.
7. Credit cards give you an emergency line of credit. Credit cards can be a financial safety net if
you don’t have enough cash or savings to cover any unexpected costs that arise. Remember that
you have to repay everything you owe, though.
8. Credit cards often have complimentary extras. Credit card features such as travel insurance,
purchase protection and extended warranty insurance can save you money and give you peace
of mind. Other value-adding features include complimentary flight offers, passes to some of the
best airline lounges and even free checked bags.
9. Travel reservations and insurance. In today’s Internet age, reserving your flight or booking your
hotel stay often requires a credit card to complete. If you don’t have one, you may find it hard to
make your travel itinerary. Also, most travel credit cards come with a variety of insurance and
coverage options, including travel accident insurance, lost luggage coverage, car rental collision
damage waiver, trip cancelation and more.
Disadvantages of Credit Card

1. Paying high rates of interest. If you carry a balance from month-to-month, you’ll pay interest
charges. Purchase and cash advance interest rates can be as high as 22% APR, so you can end up
paying hundreds or thousands more than you initially charged in interest if you’re unable to
make repayments each month.
2. Credit damage. Missed credit card repayments and ongoing debts are recorded on your credit
file and can impact your chances of getting a loan down the track. See our guide on how to
improve your credit score for some tips.
3. Credit card fraud. There are a range of fraud schemes that target credit cards. While you can be
compensated for illegal transactions on your account, dealing with credit card fraud can still be a
time-consuming and stressful experience. Scammers could use skimming devices, phishing
techniques and other tricks to steal your credit card information and your hard-earned money.
4. Cash advance fees and rates. Financial institutions make it very expensive to use your credit
card to get cash out or make other “cash equivalent” transactions, such as buying foreign
currency or gambling. Using a credit card for a cash withdrawal will attract a cash advance fee
worth around 3% of the total transaction amount. It also typically attracts an interest rate of 19–
22% right away.
5. Annual fees. While you can often get debit cards without annual fees, most credit cards have
them. These can cost as little as $25 per year, or as much as $1,200 depending on the card that
you choose. Generally, the more perks you want, the higher the cost of the annual fee. If you
want to avoid this charge, you can consider a no-annual-fee credit card — but make sure you
look at all the other features to help find a card that works for you.
6. Credit card surcharges. Businesses often apply a surcharge when you pay with a credit card. For
Mastercard and Visa products, this fee is usually 0.5–2% of the total transaction cost, while for
Amex cards it could be closer to 3%. Whatever the case, this is an extra cost for the convenience
of paying with plastic.
7. Other fees can quickly add up. Depending on your card, you could be charged fees when you
miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance
transfer fees and even some rewards programs fees. If you carry a balance or don’t have access
to interest-free days, there’s also a good chance interest will be applied to these charges.
8. Overspending. When talking about the pros and cons of credit cards, this is the classic
downside. Some individuals can get easily carried away with their credit card, creating a debt
that is beyond their means to pay off.