You’ll hear all kinds of opinions on the pros and cons of using credit cards. Granted, if you develop poor credit card habits, you could be opening the door to financial problems in the future. However, when used responsibly, they can offer several benefits to consumers.
Trying to organize and balance your monthly finances can be complicated when using a variety of money sources. For example, you might write checks, employ debit cards, pay for some items using cash and charge other purchases. Using a charge card for all your purchases, or the majority of them, makes it much easier to stay on top of your monthly expenditures. You’ll receive one monthly statement listing all your transactions. In addition to staying organized, charging is much more convenient than writing a check or making sure you have the cash in your wallet for every little purchase.
Many companies are using rewards as a way to encourage consumers to charge. Depending upon the company and their reward program, you may earn a small amount of cash back equal to as much as 2 percent on general purchases. In fact, some companies also offer miles or points good towards special purchases like travel transportation or hotel stays. Reward features may not be of interest to those that don’t use their cards frequently, but if you do charge a great deal of purchases, it might be beneficial to consider reward cards.
Unlike some types of loans where you begin accruing interest the moment you borrow the money, charge cards come with a grace period. Grace periods may vary between 20 to 30 days before the card begins charging interest. Provided you are able to pay the full balance each month, you will not be charged any interest. It is almost like getting a loan interest free if you are careful to pay the balance.
Unfortunately, thieves are always coming up with new creative methods for stealing charge cards or card numbers. Fortunately, consumers are only responsible for $50 if a card is stolen.
Introductory credit card offers are used to entice you to apply for a new card with another company, but they may have advantages. For instance, if you are carrying debt on a high interest card, you might save money on an offer for 0 percent interest over the course of a year. You won’t be charged interest on the amount transferred to a new card. This will give you time to pay off the principle much faster.
By opening a couple of card accounts and managing them well, you might be able to improve one or more of your credit scores from the major credit bureaus. This means making at least the minimum payment and paying on time. It is an easy way to improve credit over time, which is important because more businesses are pulling credit scores to determine whether you are responsible and likely to pay their bills.
Although no one wants to consider that a business or vendor would intentionally rip them off, it does happen. For instance, you might buy a product at a weekend craft show only to find it is defective. Perhaps you place an order for an expensive purchase that is never delivered. If you made the purchase using a major credit card, you would be able to dispute the charge, and your money would be returned.
In essence, card companies stand to make money when you are carrying unpaid balances. However, when used wisely, you can avoid interest costs and enjoy the convenience of charging.