Money is the thing without which your life has become unthinkable (unless you live on a desert island). You need it to get the stuff for daily functioning, pay the bills and thus enjoy all the conveniences of modern life, but also to afford some pleasure. So it’s always good to have some cash, but credit cards can also be a valuable financial tool.

This small piece of plastic allows you to buy and pay bills even when you don’t have enough money. Then, you’ll repay that later or split the amount into installments. So when you use a credit card, you are actually borrowing money for a purchase that you will make now and repay later. But, of course, you pay a fee for this service.

Although convenient and very useful in certain situations, credit cards are not a good option for everyone. With optimal use and regular repayment, you can certainly solve many problems. But with excessive spending and accumulation or late repayment, you can easily fall into a vicious circle of debts.

So you must follow basic rules when using a credit card to avoid unwanted situations. You can find out more about them at this link. Still, whether the card will be a good choice for you depends on your financial habits and abilities. So it’s good to know a couple of pros and cons of this financial toll before applying for it.

Pros: Convenience

For starters, this plastic piece allows you to spend money on things you wouldn’t otherwise have the cash to buy. Credit cards let you to borrow money from financial institutions for urgent purchases or costs. But you can also use them to withdraw cash if you run out of it.

Another benefit of a credit card is the convenience it brings. Many people are more comfortable using it than carrying cash. Also, many issuing companies offer different packages to attract new clients. These can include frequent flier miles, cashback, and more.

Cons: Temptation

The bank sets a monthly limit based on several factors when applying for this financial tool. For example, it takes in your financial standings, average monthly consumption, income, etc. And you don’t have to reach that limit every month – it’s just something you have at your disposal, just in case.

But that is precisely what can cause problems for many people. When they know they have a lot of money at their disposal, they can ignore the fact that that money is not theirs. That can be a trigger for reckless purchases and expenses. So they’ll enjoy it at first, but they’re sure to get a headache when it comes to billing.

So you have to find a way to resist the temptation of overspending on your credit cards or find a better solution. For example, you might find that taking a short-term loan is a more affordable option. As seen on https://www.kredittkortinfo.no/, credit cards are also a type of short-term loan, but they are not as favorable as they might seem.

Using cards to make purchases that are not urgent can increase the likelihood of overspending, especially if you have a high limit. So you should only use them when you really need the money. If you have a low limit on your card, you should limit your purchases to those you would make anyway.

Pros: Great for Emergency Situations

If you’ve wondered why people need credit cards, it’s because emergencies happen. For example, heaters break down in the winter, ACs fail on hot days, and cars break down on long road trips. As a result, many people use their credit card to cover unexpected expenses and thus make the most of this financial tool.

These pieces of plastic can come in handy even if you have enough savings to cover some unexpected expenses. That money will remain for rainy days, and the current debt repayment will be postponed or extended. That can bring relief, especially if you have earmarked your savings for something else.

Cons: High-Interest Rate

Credit cards are a convenient way to make purchases without using cash. They are attached to your checking or savings account. Whatever you spend now will be withdrawn from your account later. You’ll be safe and sound as long as you do that on time and have enough funds to cover these debts. The problem arises when you don’t pay off your balance on time or have no money to cover it. In that case, you may face late fees and interest.

Credit card companies love to play the hero and help those in need. But they don’t do that because they want to make your life easier. Their primary goal is the interest you pay. When you repay your debts on time, your transactions will cost you a little more. That’s a regular interest you’ve agreed to pay.

Annual fees are something you also have to pay. That can happen every month or as a lump sum once a year. Also, in many cases, you’ll have to incur charges for cash withdrawals. If these costs outweigh the benefits (cashback or discounts you earned), think twice about whether credit cards are good for you.

You’ll pay the regular interest plus late fees when you’re late. These will dig a huge hole in your pocket. Also, these penalties can affect your rating, which is much worse in the long run. They can lower your credit score and lenders’ perception of your financial strength. So the general advice is to avoid credit card usage if you can’t handle your debts.

Pros: Build Credit Rating

One of the main benefits of credit cards is their ability to offer fast rating build-up or improvement. Also, when you use this piece of plastic for your purchases, you agree to repay the company the amount you charge, plus any applicable interest. Also, it’s easier to keep track of how much you spend as you get monthly statements from your bank.

Many issuers have rewards programs and incentives for new clients. Some credit cards come with special benefits, like accumulating discounts or cashback. Some offer 0% interest introductory periods, which can be great for building credit. Just make sure you’re not spending more than you can afford.

A credit card offers a convenient way to make purchases and often has a grace period for paying off the balance. So their responsible use can help you build your credit history. Also, since you don’t have to pay interest on purchases for a while, you can start building a solid credit history and save money for big purchases in the future.

Cons: Minimum Due Amount

Another common disadvantage is the minimum due amount. It’s a portion of your installment you have to pay on or before the due date. That will ensure you’ll avoid penalties for late fees. But many new credit cardholders are confused about this item on their total bill. It’s not high (up to 25% of debt balance), so they think they don’t have to pay it.

Because this cost seems irrelevant, some card users continue to overspend and neglect it. But the interest piled up can become a considerable amount over time. As a result, many people end up in a financial trap that can be detrimental for their credit history.

The same will happen if you pay only this minimum amount. You can pay off the minimum each month or carry the balance from month to month. Paying this minimum will spare you late fees, but it doesn’t do you a favor. In fact, your costs for the remaining debt amount can skyrocket in just a few months.

Pros: Safety

It is safer for people to carry credit cards instead of money. Any theft of cash is a great stress and can be difficult to prove, especially if the amounts are not high. On the other hand, reporting stolen credit cards takes just one phone call. At the same time, you block its use, so the card is unworkable for the one who stole it. That protects your bank account from unauthorized or fraudulent transactions.

Also, when it comes to protecting your identity from unauthorized use, credit cards can come in handy. They use encryption to keep your information safe. Also, the physical security on this valuable piece of plastic (magnet strips, QR codes, CVV, PIN) and the isolation of sensitive credentials are critical to ensuring that no one can steal your identity.

Credit cards also protect you from liability for fraudulent purchases. It means that fewer fake transactions and charges are associated with them. And even if these fraudulent activities happen, you won’t be liable, providing you report them on time. You can check this website for more tips on using credit cards safely.

By understanding the advantages and disadvantages of credit cards, you will be more confident when using them. So when you spend reasonably and pay your debts on time, you’ll get the most of this handy financial tool.