If you’re having a hard time thinking whether you want a credit card, a debit card or just cash because you are just not neat enough, then here are some reasons of why you should or should not have a credit card.
Pros and Cons of Credit Cards
- You can use your credit card even if you don’t have money in it
- You can use a credit card to make purchases on the internet
- Credit cards are easy to use
- Credit cards have high security
- Credit cards keep records of your payments
- You won’t need to carry too much cash around
- You can get promotions and rewards for using a credit card
- You might have to pay some sneaky fees without noticing
- It can cost you a lot of money
- Using a credit card can lure you into a huge debt
- They encourage financial irresponsibility
You Can Use Your Credit Card Even if You Don’t Have Money in It
You can pay later!
Credit cards can be used even when there is no money in them. Why? Because credit cards allow you to borrow money from the bank, but you have to pay it back – with interest.
Normally, the credit card company collects the money that you borrowed monthly, and if you pay back the whole balance each month then there is no interest to pay.
If you do not pay off the entire balance each month then the card issuer will charge you a high rate of interest – the rate varies between cards and with interest rate levels generally.
However, there is a minimum balance that needs to be paid each month, and if you do not even pay that then there will be added charges which can rapidly mount up to a huge cost in relation to the sum you failed to pay.
On the other hand, debit cards are different. Debit cards don’t allow you to borrow money, if you don’t have the money in the bank, you can’t use it because if there’s not enough money for the payment then the card will just be declined.
You Can Use a Credit Card to Make Purchases on the Internet
Credit cards allow you to buy stuff off the internet – yeah!
If you’ve visited Amazon.com or Alliexpress.com and other online shopping websites, you probably know already that even though most products can be paid for when they are delivered, many of them can’t. Most, in fact.
Nearly all of the products that only accept payments before the delivery will accept payments from debit cards, credit cards and even other payment methods such as PayPal and so on.
Credit Cards are Easy to Use
In order to make purchases online with credit cards, all you need to do is enter the card number, the expiry date of the card and the CCV which is a 3-digit security code on the back of the card. All of this information can be found on the card.
You also have to fill in some first-time purchase forms which will ask you for some private information such as your full name and your address – the banks use this to verify you are the owner of the card.
Enough with the online shopping for a moment, if you enter a shoe shop, you might know that most shopping shops accept credit cards too. To use credit cards to buy from the store, all you need to do is swipe. Slide your card through a machine that can do all the work for you.
Credit cards make it super easy to spend money.
Credit Cards have High Security
When it’s fast and simple, it can also be safe and secure, but there are some exceptions.
You might be thinking “what if my card gets stolen?”. That’s not that easy, trust me.
If your card gets stolen, they can’t use the card for online shopping even if they know all the card information as long as they don’t have your billing address, they can try as hard as they want but the payment will not go through because your bank will recognise that the billing address is incorrect. This applies to online sales.
Hence the newer cards are now chip and pin. Banks protect you against fraud by underwriting any losses through fraud. This was costing them so much money they introduced the chip and pin cards which cost them more to produce but stop much more in the way of losses to them through fraud.
However, if your neighbour is the thief, they will know that it’s your card because your name is on the card and you live right next to them, so they also know your billing address.
If you can’t find your credit card, the best thing to do is call your credit card company to disable the card so that no payments can be registered in the card.
You should also probably know that the thief can still swipe your card and get some clothes and shoes if you dropped the card near a shopping centre somewhere and you don’t realise that your card is missing. But the amounts involved will be small before a pin is required – which presumably they will not have.
Take care though – savvy scammers can read the chips on cards and reset them. Security is an ongoing battle
Credit Cards Keep Records of Your Payments
If all of a sudden your monthly expenses increase or decrease by a lot, then you can go back and check what you spent your money on. This way, you can learn what to do to save money.
If you lose your credit card and get it back, you can also make sure the person who stole the card didn’t make any purchases, because if he did, then the purchase will be recorded in the payment history.
Or maybe you give your card to your children (that is of course lunacy), to buy something because you don’t have time to buy it yourself, then you can keep track of how much they are spending.
Even though bills do the same thing, I have seen about 2 people out of a hundred that keeps their bills after they buy stuff at Walmart or something like that.
You Won’t Need to Carry Too Much Cash Around
If you have a credit card, you can use the card instead of cash, obviously. But some places don’t accept credit cards as payment, so you might still want to carry a little bit of cash around with you.
Some places also charge a fee for using a credit card. This was prevalent in Asia and still is. I believe it is actually against the terms of service in the West and maybe in Asia too. No one bothers much about rules and laws in Asia though! Hence the huge intellectual property issues between the US and many Asian countries – no honour!
You can also use this as an excuse for your wife to pay for dinner every once in a while, just take the credit card, leave all the cash at home and go eat at a place where you know they only accept cash.
If you’re lucky, she will probably forget that you owe her dinner even though you’ve paid for dinner a couple of hundred times in the past. That doesn’t count so beat it.
You Can Get Promotions and Rewards for Using Your Credit Card
To make you think that they are beneficial to you, credit cards give you points everytime you make a purchase. Have you ever went to Tescos and got a Tesco Lotus card?
If you have, you’ll know that about every 10 quid you spend gives you a few hundred points for discounts next time you come and buy something at Tescos.
Credit cards are similar, when you buy something, they give you points probably in an app on your phone. These points are basically for buying some items or getting discounts from your purchases. The points or freebies you get are the bait to get you to apply for their card.
This is both a pro and a con really because if you are smart and organized then you can play one credit card off against another and get some great benefits. The downside is that 99% of people are just not organized, can’t keep themselves to what they plan and therefore will get trapped like a sea bass on a giant fishing hook!
You Might Have to Pay Some Sneaky Fees Without Noticing
If you haven’t noticed, you can use the credit card for the convenience without charge – at the point of payment.
Some high-value cards do come with a fee. American Express is a card issuer that charges a fee. However, usually, there are benefits that come with the fee charged assuming that you use the card.
Most credit card issuers actually do not charge any fee to apply. You may also be tempted with free interest periods, points programs and the like. Why do the credit card issuers do this?
Because most people do not pay the card balance back each month and use the card as a sort of bank loan at very high interest rates. They also get fees from people who pay late where the charges can be very high.
It Can Cost You a Lot of Money
Most banks don’t charge you money for getting a credit card.
They make their money from the people who are not savvy enough to manage their money and pay their credit card off each month. Plus they get even more money from the unfortunate people who cannot manage money at all and don’t even make the minimum payment.
The people most likely to be financially ignorant and careless are the poor. Ever wondered why household finance which used to be a subject just after the war was dropped?
Why the hell don’t they teach this stuff at school.
If you don’t pay your interests and fees on time, banks will charge you more interest over time and even disable your credit card until you pay it. This means you might have to spend even more money to get your card working again.
If poor financial education were not enough of a problem for the less advantaged then the behaviour of the banks outlined above will certainly give you a headache and lead to debt.
Using a Credit Card can Lure You into a Huge Debt
Since credit cards are so easy to use, it can make you spend money more often and if you don’t keep track of how much you’re spending, you might end up being bankrupt.
If your parents told you not to use your future money, you should listen to them. Because there have been plenty of cases where people can’t pay their interest.
If you are uncertain that you will get enough money to pay your credit card fees by the end of the month then you shouldn’t use more money than you have on the card.
In other words, if there’s a possibility that your salary will be delayed or you will lose your job, then just don’t use any of your future money. In fact, don’t EVER spend money you haven’t already got.
Hunger is a terrible sufferance.
They Encourage Financial Irresponsibility
Although I have covered this point above, I want to stress the point.
Credit card companies make their money by relying on the poor financial acumen of most people. They can lure you with promises of benefits you can get – if you meet the criteria. The fact that you can buy now and pay at the end of the month without cost – if you pay it back in full.
They bribe you with points you can redeem for valuable products – that are valued about twice what you can buy them with which greatly devalues the points. If you are savvy and organised you can use this to your benefit but most people are not – and that is how they make their money.
They try every which way to trap the unwary.
Don’t you just love banks?
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