A credit card is a simple piece of plastic or metal that is thin and rectangular in shape. It is issued to a person either through the bank or the financial services company and allows cardholders to borrow funds with which they can pay for goods and services with those merchants that accept credit cards as a means for payment. Owning a credit card imposes an obligation on the cardholder that they must pay back the borrowed money along with the interest as well as all agreed-upon additional charges that may incur. The cardholders are expected to pay either the full amount by the billing date or the full amount over a specific period of time.
Pros and Cons of Having a Credit Card
Yes, there are many advantages of owning a credit card as follows:
- Credit cards are widely accepted modes of payment.
- Credit cards allow you to make a purchase today and pay it off at a later point in time.
- Credit cards allow you to make your payments easily and conveniently.
- Credit cardholders can earn rewards on their purchases, along with welcome bonuses and statement credit benefits.
- If the cardholders pay on time and keep a low or minimum balance, it is easier for them to build a good credit score which will help in qualifying for other financial assets such as loans and mortgages.
- If the credit card of the cardholder gets stolen, the cardholder has limited liability from fraudulent charges of a maximum of $50.
However, there are a lot of disadvantages of owning a credit card as well, such as:
- Failing to pay your bills in full by the due date will impose interest charges on you and you may fall into debt.
- Some companies and merchants limit the type of credit card networks that they accept, and so you won’t be able to use the same card at every shop.
- People are more likely to spend with credit cards than they would wish cash in hand or debit cards.
- If you miss out on your payments, it will result in your credit score being dropped.
- People may be tempted to overspend in order to earn discounts, rewards, and additional perks.
- It is very common for credit cards to get skimmed at gas stations, or get stolen and hacked online.
Should you own a credit card?
There are thousands of credit cards available to customers which makes it hard for them to settle on just one. Credit cards can thus allow cardholders to earn rewards and discounts and build credit. Credit cards are useful in cases of emergencies and also allow people to save money on purchases. If managed properly and paid in full every month, credit cards can be quite helpful and useful in various situations, and thus owning one is a smart financial move.
