Pros and Cons to Credit Cards

There are several pros and cons to getting a credit card, so take a look at these before you apply for the credit card for the first time or attempt to get a new credit card.

Pros to Credit Cards

Let’s start with the positive reasons to get a credit card. With a credit card, you can:

  • Build credit: One of the biggest benefits to getting a credit card is that your credit card will communicate with the credit bureaus how well you handle credit. If you handle your credit card responsibly, it will have a positive effect on your credit score. 
  • Tap into convenience: Credit cards offer a lot of convenience because you don’t have to have a lot of cash, especially when you need to make large purchases. If unauthorized charges show up on your card, you won’t have to pay them. 
  • Get rewards options: Many credit cards offer cash back, airline miles, hotel points or gas rebates. You can also get access to shows, concierge services, special gifts and much more.
  • Take advantage of travel insurance: You can get insurance against cancelled trips, accidents, delays, lost luggage and even death. However, some cards offer better benefits than others, so check around before you dive in. 
  • Get small business owner perks: Business credit cards offer specific rewards for various items that small business owners need.

Credit cards also offer other perks, so check with individual credit card issuers to figure out what each one offers.

Cons to Credit Cards

Let’s take a look at some of the cons you may find with a credit card. You can face:

  • Debt: One of the biggest cons to having a credit card involves the fact that because “it’s plastic,” it doesn’t seem like you’re spending real money. It’s easy to overspend with a credit card, which can put you in debt, in collections or even lawsuits.
  • High interest rates: Credit card interest rates hover around 18%. This high interest rate can put you in a precarious financial position if you continue to only pay the minimum or miss making your regular payments. 
  • Fees: You might pay several fees for your credit card in addition to high interest rates. For example, you might pay an annual fee, balance transfer fee, cash advance fees, account overdraft fees and foreign transaction fees, to name a few. That’s why it’s really important to review your credit card disclosures so you don’t encounter any future surprises. 
  • A short-term credit ding: You could take a small credit hit when you open a new credit card. Therefore, never take out a credit card right before you decide to get an important loan like a mortgage.

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