Disadvantages of Credit Cards
Most people think of credit cards as being their saving grace when they do not have enough cash on hand to pay for something. This is especially true if you find yourself in the middle of some kind of emergency.
The credit card is also a way of making sure that you can buy everything that you need at once including goods, services and properties without having to pay for it all upfront. In fact, you could say that credit makes the world go round except when it causes you to go deep in debt.
The Drawbacks of Credit Cards
Whenever you get a credit card you have to sign an agreement and you have to stick to it. If you break the contract it means that you are going to pay for your transgression one way or another. The most common result of not paying your credit card bill is a larger payment that includes a generous boost in interest.
Another consequence of late payments is a bad credit rating which can lead to problems if you want to open an additional credit card, get a mortgage or get a credit line from a bank. An unpaid balance looks like you do not have the proper resources to fund your account so don’t be surprised if all of your applications for loans and credit are immediately and ruthlessly rejected!
The Temptation to Overspend
The worst thing about credit card ownership is that temptation to spend the card up to it’s limit. This does nothing but help you build your debt troubles that you are unable to handle in the future. If you are an impulsive person then you may not be a good candidate for credit card ownership. Try to save the credit card for spending on necessities rather than luxuries.
Budgeting is Necessary
If you are not good at budgeting or taking care of your resources owning a credit card can lead to insolvency. The same goes if you are not providing a certain percentage of your income to cover your debts. If you do not allow for this then you will be living in debt every single month. This can even lead to legal action and bankruptcy if you are not careful.
Read the Fine Print
The terms and conditions in credit card contracts can be really confusing. They can be hard to understand. This leads many credit card users to assume the wrong things and the consequence is often very heavy debt. Make sure you understand the subtleties of service fees, interest rates and penalties before you get the credit card.
Yes it is a good thing to have a credit card, especially if you do not like carrying crash all of the time. However owning one is a big responsibility and you want it to be a help rather than a hindrance. That is why it is so important to use your discretion before you use the credit card and figure out which items are a luxury and which ones are absolutely necessary for you to buy.