Credit cards are neither good or bad. It’s merely a financial tool that affords the cardholder certain conveniences and access to exclusive perks and benefits like discounts on some brands and restaurants, as well as access to airport lounges and freebies.
Owning one or several credit cards isn’t a bad thing, but when the cardholder misuses it, then it will definitely lead to disaster and even jail time in some countries as well as negative points one’s credit score. A negative credit score will make it difficult for you to secure a loan in the future, or avail of any financial services from banks and other financial institutions.
Owning a credit card comes with certain Pros and Cons. Here’s a few of them.
1. Instant Credit Line
Having a credit card gives you instant access to a credit line that you can use when you don’t have enough cash with you. It also allows you to establish a credit history when you’ve made payments on your credit card. That being said, I am not advocating that you use your credit card as your Emergency Fund. You should always have a separate Emergency Fund, in cash.
Instead of carrying wads of cash with you for big ticket items, you can just pay for it using your credit card then pay the bank at a later time (before the due date). Credit cards also allow you to pay for certain purchases online when COD (Cash on Delivery) option isn’t available. A credit card also allows you to pay for your expenses outside of the country when you’re traveling without the need to buy foreign currency. Just make sure you know how much you’ll get charged for foreign currency transactions by your bank though.
3. Flexibility on payments
Some merchants have promotions on certain items where cardholders of a specific card can pay in installments at little to no interest. A word of caution, do not abuse Interest Free payment schemes. Before you know it, all the expenditures you’ve made will make your outstanding balance balloon and make it difficult for you to pay on time.
4. Exclusive benefits and discounts
Some credit cards like those from MasterCard have access to airport lounges. This comes in very handy when you travel a lot, or if you’re an OFW like me. You get access to free food, drinks, wifi and even a shower facility at the airport before your long haul flight. Some merchants also provide huge discounts and freebies.
5. Expense Tracking and Security
The regular statements that you receive allows you to keep track of your credit card spending. Getting a statement lets you check if anyone else has made fraudulent transactions using your card.
1. Annual Fees
Convenience, just like anything else comes at a price. The more exclusive your card is, the higher the annual fees that you’ll have to pay. Fret not though, there are credit cards that waive the annual fees, for life. Just check with your bank.
2. Interest and Finance charges
If you’re not careful and you fail to pay your dues on time, you’ll end up paying more than you originally planned because of interest, finance charges and late payment fees. Pay your bills on time.
3. The Debt Trap
If you’re not careful, and you misuse your credit card- you’ll end up neck deep in debt, and depending on the laws of the country you’re in, you can end up in jail or be blacklisted from banks.
Should you get a credit card? Well that depends on you. If you’re the type who can’t resist the temptation to shop on impulse or book a seat sale because you don’t want to feel left you- then don’t. You’ll only get yourself in trouble and set yourself back financially. However, if you’re financially savvy and qualified to get one, then by all means do so. Again, a credit card is just a tool. It’s only as good or bad as the one using it.
I used to have three credit cards before, but I’ve since cancelled the other two and stuck to just one. The one I have is from the same bank where I get my salary which makes it easier for me to pay for my bills online as opposed to having a credit card from a different bank. I only use my credit card nowadays to avail of certain discounts and freebies, as well as airport lounge access to avoid racking up bills on it again.