Credit Card: Benefits, Pros & Cons
Credit card also known as plastic money, is a card that allows us to make payments almost everywhere without the need of having cash. It is issued by banks or financial institutions and can be characterized as a means of payment.
We use the credit card for shopping, hotel/airline tickets purchase, restaurant visits and many utilities. But most of all, it’s easy to shop on the internet.
Its biggest difference against the simple bank card is that the card user gets to borrow money immediately instead of withdrawing it from our bank account. What does that mean?
We can use money we don’t have. As the name says, we take a loan from the bank. This credit is later repaid in two ways as follows:
- You can pay the full amount at the end of the month. Thus, no interest is applied. You only pay for the money you borrow.
- You repay the loan amount in small monthly installments. In this case the banks charge an interest rate.
How do we benefit?
Credit cards are a widely accepted and very useful means of payment, especially abroad. Ordinary credit cards are accepted in limited countries. On the other hand, credit cards are almost everywhere accepted and then very convenient during your travels in America, Europe, or Asia.
In addition, you benefit from several insurances against the damage of your purchases or unforeseen accidents during your travel.
What are the strengths and weaknesses of a credit card?
If you’re wondering what a credit card is for and there are hidden traps, the following list will answer your questions.
The positive sides:
– A credit card offers more convenient payment over cash. You only bring a card which can be used to pay everywhere. Without worrying about withdrawing a sufficient amount and without fear of having to circulate with a large sum. Credit cards are accepted worldwide and in most of the countries.
– Easier and safer online payments. Credit cards are insured against fraud, or non-delivery of your purchases. In case of accident you cancel the payment and everything is paid by your card issuer.
– In case of an urgent purchase, credit cards will give you the money to pay without having it in your bank account. You can then repay once the statement arrives.
– If you pay off your credit card bill at the end of each month in full and stay within the credit limit, there is no interest to pay.
– You benefit from the additional services that you do not find with conventional cards. Insurance and assistance are linked to most credit cards. You are also part of a loyalty programme from which you earn discounts, air miles and other exclusive offers depending on the card chosen.
Points to watch out for:
– Be careful with your expenses. Sometimes if you borrow a lot of money, it is expensive to pay it back. In this case it is better to try a personal loan, with a more favorable interest rate than credit cards.
– Credit cards often charge an annual fee for their use. If you don’t use your card frequently, maybe a regular credit card is enough for you.
– Cash withdrawals are not recommended with your credit card. Additional charges are applied. In this case, prefer to use your credit card.
– In any case, there is still the risk of theft. Be careful, keep your PIN code secret and call your provider’s stop number immediately in case of loss.
In short, credit cards are very profitable and useful in everyday life, if you follow a rule: you only use money that you can repay. There is also a reason, that we are restricted by the limit of the card.