The Beauty And Ugliness Of Credit Cards

Written by: Lori Gracing

Credit cards are like weapons. It is not the weapon that makes the outcome good or bad but the user. Credit cards can be a very convenient way to pay for things like household bills, travel and loans, but at the same time be the cause of your complete financial destruction.

One thing attractive about credit cards is that you are using other people’s money, in this case banks and credit card companies, to fulfill your financial needs. When you are paying cash or through debit card, it is your money that is at stake. Not in case of credit cards. It is the bank’s money that is at risk of loss. That’s why your bank or credit card company will fight tooth and nail for any theft or misuse occurred even if it is due to your fault. All you have to do is call the company, report the error and relax. Your money is safe, so are your credibility and the chance for future credit card offers.

Used responsibly, your credit card can be the one thing that will lead to financial success. It can help you build credit rating with time and provide all the fund you need to pay for your household as well as business expenses. Not only that, it will provide rewards for spending, in the form of cashback bonus, miles, points and statement credits. Most of these credit cards also offer protection on purchases that the manufacturer warranties won’t cover.

On the flip side, using credit cards without concern for accumulating debt can lead to your financial disaster. Credit cards can bring in the biggest downfall of all other mode of payments if you are careless. People who don’t pay off balance before the due date will incur huge finance charges, sometimes more than 30 percent. All the disadvantages that will happen due to careless spending can negate any of the benefits that the credit cards come with.

If you are terrified of using credit cards and insist on paying for everything by cash or checks, good for you. Stick with your decision. Just remember that after all only a few things you will be forgoing by doing this – convenience, rewards and card protection to name a few. By using cash for every purchase, you will be adequately compensating for card misuse or overspending. However, if credit card is something that you cannot live without, then make sure that you don’t carry a balance.

That’s right! Carrying a balance is a recipe for financial disaster as mentioned before. Although a strong word, you should never do this at any circumstance, no matter how attractive the rewards are and how tempting it is to see all the extra hard cash in your checking account. Interest rate for carrying balance can easily top around 20 percent, a huge amount if you consider all the expenses in a typical household. It can get even more expensive when you are spending recklessly for unwanted electronics, unnecessary vacations and unhealthy foods.

So weigh in the benefits and drawbacks of having a credit card and using it to make purchases on a regular basis. If paying high interest is inevitable, avoiding credit card in the first place is a smart thing to do. Statistics suggest that almost half of Americans carry balance month after month. These statistics also tell how much on average Americans spend through credit cards. That number is somewhere close to $10,000. Unfortunately, these same statistics make it look like it is a normal thing to have a big balance or incur huge charges and thus can be misleading. What they don’t tell is that this number can even be smaller due to payoff, or credit cards are asking these studies to create an infomercial rather than inform the consumers the truth so that they can keep on their spending habits alive. What this tells us is that, the other half of the Americans are still keeping track of what they spend on and how much they spend as well as pay off their balance on time. The point is to not carry credit card balance just because everybody is doing, and be punctual when it comes to paying your bills.

Another convenient truth that is hard to swallow for credit card companies is that they hate consumers who are deadbeats – those who pay bills on time and are never being charged a penny as late fees. As much as creditors hate people who don’t pay balance at all, they are not a fan of deadbeat customers either. The deadbeats are in for a free ride, enjoying all the perks and rewards that are offered to them at their doorstep and facing none of the downsides that come with credit cards. The best part is, these deadbeats are not tempted to make careless spending but keep an eye on every charge that has incurred. Being a deadbeat is a good thing. It can help you raise your credibility and increase your credit score. It is less expensive, make you eligible to some incredible interest rates in the market. You will get cheaper auto loan, mortgage, and businesses are likely to refer you to others for funding needs.

Besides, being responsible with credit cards will entitle you to fringe benefits that are not offered to careless customers. For example, your credit rate will determine how much of introductory bonus you will receive, the extent of purchase protection, even life insurance in some cases, merchandise discounts, favorite deals when it comes to foreign currency exchange rates and much more. They, however, vary by card company and type of credit card. You can shop for the best credit card online, compare them and come up with one or two that offers the best deals. And don’t underestimate the power of negotiation. One call to the customer support center can help you get the best perks that are not offered in usual circumstances because credit card companies hate to lose potential customers.


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The Beauty And Ugliness Of Credit Cards

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