Credit cards are one of the most convenient ways to pay for purchases. It gives you the chance to go out without having to bring a lot of cash with you. For frequent travellers, this can be a huge convenience indeed. The only problem with credit cards are the costly fees and huge interest that comes with not being able to pay your dues on time. Wise use of your credit card can be made, but it would take a lot of discipline.
Advantages Of Credit Card Use
When you want to make a huge purchase but can’t afford to pay all at once, having a credit card can give you installment payments at 0% interest spread over a number of months. This is such a huge convenience which allows you to budget your expenses for other needs. The key is paying the monthly installments on time up to the end of the interest free period. Penalties and interest will be added to your balance each month if you fail to do so.
Get loans at 0% interest
There are some credit card companies who offer cash loans with a 0% interest free period. This can be a quick and easy way to get instant cash for emergency purposes. Just like with any other credit card scheme, the key is to pay the monthly installments on time and finish before the 0% interest period runs out. On the average credit card companies charge an 18% rate so it would be wise not to have delays in payment. Companies may offer up to 59 days interest free options for personal loans, which can be a big help in your cash flow management.
There are some credit cards that give incentives for you to spend. There are several rewards programs that you can take advantage of like cashback, loyalty points and frequent flyer miles. You should not have any unpaid balance on your credit card to enjoy these rewards. Hefty interest payments for unpaid balances negate the “earnings” that you get from these reward programs.
There are many online scams and frauds these days and credit cards can give you added protection compared to using debit cards, cash or check payments. If the purchase made is between 100 and 30,000 UK pounds you will be able to get your money back if something goes wrong with the purchase. The company that you bought from may have closed down, or your purchase is not consummated. Your money can be claimed and the credit card provider will send you a refund. This is guaranteed under section 75 of the Consumer Credit Act, which gives those in the UK one of the most powerful credit card protections in the whole world.
Switch Your Balance
If you have unpaid balances with your credit card provider, it would be to your advantage if you get a new card and transfer your balance at 0% interest rate. There is a transfer fee of around 3% which is still way below the 18% that you would have to pay if you retain your current card and continue paying off your balance. This is known as switching your balance and is a practice that you can take advantage of for lower interest rates on your unpaid balances.
Disadvantages Of Credit Card Use
Don’t Fall Into The Debt Trap
One should always keep in mind that using a credit card is a form of borrowing. This buy now and pay later scheme has caused many to fall into the debt trap due to unpaid balances.
The rule is simple, one needs to pay off the balance in full each month in order to avoid exorbitant interest rates. You can be sure that your debt will get out of control if you start missing on payments and most especially if you pay only the minimum monthly amount. Look at credit cards as a short term borrowing tool.
The reason why your credit card bills skyrocket at a very fast rate is due to the hidden charges on top of the high interest rates. There a late payment fees, plus penalties if you exceed your credit limit. Most companies also charge a 2% fee when you withdraw from an ATM, so it would be best to avoid such situations.
Having a credit card can be a big help for an individual as long as there is discipline and knowledge on how it works. It also takes the application of that knowledge in order to ensure that one will not fall into the debt trap, which many do not recover from. For those who know how to take advantage of the perks and incentives, having a credit card should be a part of your lifestyle. To those who lack discipline and can’t control their spending it would be better to give up their cards by cutting them in half.