Credit Card Benefits and Drawbacks

Credit cards have both benefits and drawbacks. It is wise to consider both before applying for a credit card. While they can be very useful, credit cards can also be risky. Even people who are usually good with their money get into trouble with credit cards. A credit card can be useful, but may also end up putting you in a difficult financial situation if misused.

Here are some of the benefits of credit cards:

Withdraw cash 24 hours a day, anywhere in the world.

Buy online. It is the quickest and easiest way, and you are protected against credit card fraud.

Repay in regular instalments. Typically, these incur interest.

Usually, there is an interest-free repayment period, which you can use to repay your debt in full, interest-free.

One of the main benefits of using a credit card rather than a debit card is the protection provided by the Consumer Credit Act. This says that if you have problems with goods or services you can get your money back from the card issuer if you can't get it back from the supplier.

Some cards provide purchase protection insurance, which pays out if something you have bought with the card is lost, damaged, or stolen within ninety days of the date of purchase.

A credit card can cost nothing - if you pick a card that doesn't charge an annual fee and you always pay the bill in full every month.

A credit card can save you money if you choose one that earns you cash every time you buy something. How much cash you get back is calculated as a small percentage of the amount you have spent on the card. Some cards offer incentives other than cash - Air Miles or shopping vouchers, for instance.

Even if you do not pay your monthly bill in full, a credit card can be cheaper than running an overdraft on your current account, especially if your bank charges a monthly fee as well as interest when you overdraw.

Using a credit card can work out cheaper than using traveller's cheques or foreign currency to pay for things abroad. This is because the exchange rate used by card companies to convert foreign spending into sterling is better than normal tourist rates. However, because of credit card charges for cash withdrawals, a debit card is better if you want to use plastic to buy currency, whether over the counter or from a foreign cash-machine.

You can give to charity for free if you sign up for a charity credit card.

Credit cards are often cheaper than loans for short-term borrowing. You pay interest on the remaining debt, not the full amount - and there are no early redemption penalties.

Credit cards offer flexibility to match uneven income and expenditure patterns: you choose what to pay off each month, between the minimum and the total outstanding.

Their consolidated accounting enables one cheque to settle multiple transactions ? while all appear neatly on one pre-prepared statement each month.

There is an automatic 'interest free' period per statement period.

Credit cards enable remote purchasing via the internet, by telephone or mail order.

Credit cards can include additional benefits like insurance cover on purchases, cash-back, AirMiles, Nectar or Reward points, and holiday discounts.

Here are some of the drawbacks of using a credit card:

Credit cards can be unnecessarily costly.

Credit cards may be expensive for cash withdrawals

Credit cards may be expensive for foreign currency purchases.

Their credit limits can be insufficient for your requirements.

They encourage a 'pay now, worry later' mentality and make it too easy to get into debt.

Credit cards are very open to fraudulent use.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

---

What is a Credit Report?

Ever wondered what is a credit report? If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file... Read More

Credit Reporting: How Does It Work?

In order to determine a consumer's credit worthiness, creditors and lending institutions have come to depend on credit reporting agencies. Credit reporting agencies supply individual reports that... Read More

Identity Theft ? Guard Your Childrens Social Security Numbers

Identity theft is a growing concern among Americans, and rates among the top five complaints received by states' Attorney General's offices. A stolen identity can lead to... Read More

Credit Help for Real Estate Financing: Five Categories of Your Credit Score

1. Payment History -- 35%The number of accounts paid as agreed and a good payment history give you a higher score.Negative points lower credit scores because of... Read More

Fair Isaac Corporation Credit or FICO Score

As I am not from the US, I had no idea what FICO meant before researching it. FICO stands for Fair Isaac Corporation, a company based in... Read More

Free Credit Reports - How to Maintain Your Credit Profile

Maintaining your Credit ProfileEvery consumer should be maintaining their credit profiles to ensure the highest scores possible. To do so, you must first order your credit reports... Read More

Repairing Your Credit Score and Clearing Derogatory Marks on Your Credit Report

Raising your credit score can be a fairly simple and straightforward process unless you have derogatory marks that need to be disputed (which will be explained below).The... Read More

Credit Report ? Look Out for Your Debit Report, Too

Most consumers are aware that there are companies that keep track of their personal financial transactions ? installment loans, mortgages, credit card accounts, bankruptcies and judgements. These... Read More

What Should I Do If I?ve Become a Victim of Identity Theft?

Identity thieves take advantage of everyday opportunities to discover your personal information and use it to commit fraud or other crimes. The good news is a victim... Read More

Some Truth About Credit

Credit is currently and has been historically an integral component of our economy. Credit contribute a person's net worth, and financial power. No matter who you are... Read More

Searching For A Low Interest Credit Card?

These days, people need to very carefully consider what type of credit card they will carry in their wallets. There are so many options out there, and... Read More

Clean Credit Report: Easily Raise Your Credit Score 100 points

Clean Credit Reports, your credit report contains information about where you work, live and how you pay your bills (On time or not). It also may show... Read More

Credit Repair Kit Sound To Good To Be True? It Is.

A lot of people have bad credit. It is unfortunate that good people with good intentions are sometimes lured into credit card offers with outrageous interest rates... Read More

Rate Tarts Losing Ability to Cherry Pick

A "rate tart" is someone who switches from one zero per cent introductory credit card deal to another to avoid paying interest; however they may be set... Read More

What Is A FICO Score?

A credit score is most commonly known as a FICO score. FICO stands for Fair Isaacs Corporation. It's a company that developed the credit scoring software used... Read More

Reward Credit Cards: Get the Best Rewards Card Incentive Program

A good credit reward card can contribute to your retirement account, offer gas rebates, score theme-park or vacation tickets or take thousands off the price of your... Read More

Finance - Money, Money

Finance is a big word for some of us. It's a little scary. Maybe you immediately go to thinking about "high finance." That's even scarier. But what... Read More

How To Start A Second SEPERATE Credit File!

Your personal credit file is separated from those with the same or similar names by several factors, including a driver's license number, birth date, or spouse's name.... Read More

Credit Card Dirty Tricks

There are many of us that have been badly stung by credit card companies that have charged exorbitant fees to use their credit cards. Several years ago... Read More

Avoiding Credit Card Traps

The next time you open your credit card statement, take a closer look at the small insert titled "changes to your credit card agreement". You know the... Read More

Credit Report Secrets: Do You Know What They Reveal?

If you've ever applied for a credit card or loan, you've probably had your credit report reviewed by the lender. Your credit report has a huge impact... Read More

Consumer Credit Reports

A consumer credit report is a factual record of an individual's credit payment history. It is provided for a purpose permitted by law: to help a credit... Read More

Good Credit is King, When Qualifying for Mortgage Programs

If you want to purchase a new home or refinance your current mortgage, be sure to check out the wide array of loan programs available. If you... Read More

How To Repair Your Credit Report

A credit report is run on a buyer when he or she needs to buy something that will take a long-term loan, such as an automobile or... Read More

Preventing Credit Card Mess

Credit card debts problem is extremely common today. It is usually the first sign of longer term financial troubles. How to manage your credit cards so that... Read More

Credit Report ? How to Improve Your Credit Score

One of the great mysteries of life is how the three major credit bureaus (Experian, Equifax, and Trans Union) score credit. They all have secret statistical formulas... Read More