Credit Cards: The Pros and

Cons
Credit cards often get a bad reputation, but the truth is they can be a key financial
tool if used responsibly. Here are some of the top advantages and disadvantages to
consider before you add a shiny new card to your wallet.

Advantages

Convenience: You don’t have to worry about how much cash you have on hand.
Just remember that you can always use a debit card instead. With a debit card you
won’t be in danger of accumulating debt that will be subject to high interest
charges if you don’t pay it off each month, like you would with a credit
card. Remember to keep track of your checking account balance to be sure you
can cover what you’re buying.

Recordkeeping: A credit card provides a useful record of your spending through

your monthly statement and online account, which would also be the case if you
relied on a debit card for spending. Some credit cards do send yearend summaries,
though, that can be a great resource when you’re doing your taxes.

Low-cost loans: You’re getting your paycheck in five days, but there’s a purchase
you need to make today. You can charge your purchase now and pay off the
charge after you get paid. The key here is to make sure you will be able to pay off
the charge by the due date.

Cash advances: You can get money when you need it. Be aware that cash advances
often have a higher interest rate, so it’s important that you have a realistic plan to
pay back those advances.

Member perks: With some smart shopping, you can choose from a wide range of
discounts or cash back based on your purchases. Compare the cards available to see
which perks best fit your needs and spending habits.

Build a good credit history: Using a line of credit by making purchases—and

paying them off on time—will help you get a good credit rating from credit rating
agencies, which will make lenders more likely to lend to you and offer you a
good interest rate.

Purchase protection: Your credit card may step in to help if you want to dispute a
charge or return a defective product. While a debit card may offer similar
protection, you will have to wait until the issue is investigated before getting your
money back.
Disadvantages

Temptation: Since they’re so easy to use, they also make it easy to overspend.

Interest charges: If you buy something and don’t pay it off immediately, you will
end up paying not only the purchase price but also the interest charge on that
item. In other words, if you carry a balance, all your purchases will end up costing
you a little more.

Fees: Some accounts have annual fees. There may also be fees for cash advances,
along with high interest rates. In addition, you may spend more on interest and fees
than you earn in discounts or cash back. Make sure the benefits outweigh the
costs.

Monthly scrutiny: You must review your bill each month to confirm that it
accurately reflects your purchases and that there aren’t any signs of fraudulent use
of your card. Credit cards are a prime target for scammers.

Tricky short-term teaser rates: A low interest rate may seem like a good deal, but
many people are surprised to find that the rate was only temporary. If you don’t
read the fine print, you may pay far more in interest than you expected.