Are Credit Cards a Bliss or a Curse?

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Category: Credit & Loans

Credit cards have many advantages but their disadvantages are also notable

Although credit cards are not new – they have been around for almost a century, still there is quite a lot of discussion about their positive and negative aspects. It is out of question that credit cards have many advantages but aren't their disadvantages too many as well?

Credit cards are supposed to make it easier for us to buy goods on credit but in reality we often find ourselves in debt because of credit cards. However, no matter how common credit card debt is, it is not fair to say that credit cards are to blame for credit card debt and bad credit. Credit cards, and above all their high interest rates, help us to acquire the financial burden but it is our spending habits that bury in credit card debt. There are credit card debt solutions but it is much better if you never need to resort to them to get out of credit card debt.

Credit cards are a controversial topic. There is no doubt that when used wisely credit cards do have a lot of benefits. But even if you are in total control of your spending and the dangers of bad loans and credit card debt do not apply to you, you can still experience some of the negative aspects of credit cards – i.e. you can become a victim of credit card fraud and if you don't pay attention to your monthly statements, you might have to pay quite a lot of money to cover somebody else's spendings with your credit card.

Still, are credit cards really that bad? After we see some of their advantages and disadvantages maybe we could be able to give a more precise answer to this question.

Advantages of Credit Cards

There are many advantages of credit cards but the main ones can be listed as follows:

• You never have to worry about not having money. Everybody has had cases when he or she sees a must-have item on sales but unfortunately there is no cash in the purse. With credit cards you don't have to worry about that. Even if you don't have the money now, you can make the purchase and pay later. And if you manage to pay back by the deadline the whole amount you owe, then you don't have to pay interest for the money you borrowed.

• Good for emergency purchases. While it is not advisable to use credit cards for purchasing expensive items that you can't repay soon or for impulsive purchases, credit cards are really great when you have a purchase you can't postpone – an urgent visit to a doctor, or unplanned repair, or critical damage to your car that can't wait till payday, etc.

• No need to carry cash. Carrying large amounts of cash is very risky – you can be robbed easily. Using stolen credit cards is a bit more difficult than using stolen cash.

• Widely accepted. This is certainly a benefit of credit cards, issued by a major issuer – that they are accepted almost everywhere.

• Obtaining credit is easy. If compared to the bureaucracy that goes with applying for loans with a bank, credit cards are a really easy way to borrow money. Well, the interest rates on credit cards are higher than the interest rates on most of the other types of credit but if you borrow small amounts and pay them back quickly, credit cards can even be cheaper than any bank loan.

• Keep track of your spendings. The (monthly) statements that you get are a great way to see how much you have spent on what. They can give you idea which expenses you can cut in order to save money.

• Available for people with bad credit record. Unlike bank loans, if you have a bad credit record, you might also be eligible for a credit card. Well, the interest rates might be very high, or you might have to keep always a certain amount in your account, but still you will be able to borrow some money.

Disadvantages of Credit Cards

The list of disadvantages of credit cards is shorter than the list of their advantages but this does not mean that when the disadvantages are fewer in number, they are not pretty serious, like:

• The technology itself has many security gaps. There is no way that you have not heard of credit card debt or credit card fraud. With credit card debt, it is more or less your fault because you have spent much more than you earn but with credit card fraud it is a different story. Criminals are very tricky but when the technology itself has so many security gaps, it does not take much thinking how to take advantage of them.

• Credit card fraud. This is the biggest risk with credit cards. There are protections against it but generally no matter what you do, there is a risk of becoming a victim of credit card fraud. However, if you read carefully your monthly statements and check if you are charged only for purchases you have done, you can protest any suspicious purchases and chances are that you will not have to pay for them. Also, taking the adequate measures to keep your credit card information private reduces the risk of fraud.

• High interests, risk of debt. Debt is the second major risk of credit cards. Generally interest rates for overdue payments are very high (15-20 or even more percent annually) and unless you pay your outstanding balance in full, you will pay quite a lot of money in interest. Sadly, many people just can't pay what they own and are heavily in debt.

• Not recommendable for people who can't control their spending. If you are an impulsive shopper, then you'd better avoid having a credit card at all! If you can't control what you spend your money on, a credit card is the shortest route to bad loans and you might never get out of debt!

So, after we have discussed both the advantages and disadvantages of credit cards, what can we say about them? Are they a bliss or a curse? Or maybe both – they are a bliss, when used wisely and a curse when you misuse them.

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