Since the inception of credit cards in the late 1950s, life has been made easier and in so many ways. One simple credit card has opened up doors for so many opportunities that are beneficial to buyers as well as sellers. The fact that the advantages cut across all areas of business and life, goes to show that regardless of which side one is, everyone stands to gain. However, caution is advisable, access to a credit card is not always a guarantee of access to cash, and there is the risk of putting too much credit on the card it becomes a burden to pay back.
Benefits of having a credit card as a buyer
The benefits of having a credit card are extensive, especially to a buyer, the biggest being; they remove the need to carry excessive amounts of money in liquid cash. Most major credit cards are universally accepted eliminating the hassle when trading with different currencies, and this means one can rest easy even while traveling.
Credit cards are also convenient for hire purchase or for spreading out the costs of large purchases. Instead of one huge payout, one can opt to break down the price of a purchase to manageable sizes and stretch the cost over a few months. This feature is also handy in emergency cases, and credit cards allow one to pay for sudden and unexpected needs even without ready cash. For those on monthly salaries, credit cards are Godsend. Thus they give one the power to buy services or products without paying for them until the paycheck clears.
To boost the usage if the cards, most credit cards offer incentives, and many also carry a loyalty scheme where cardholders can redeem points for various gifts such as frequent flier miles or an expense paid holiday. With the reduction of cash carried, credit cards have reduced the chances of losing cash and theft; using a credit card also means that embarrassing incidents of insufficient funds are relegated to the past.
Balance transfer credit cards, give the user the ability to shift debts at fractional or zero interest by reducing the amount of interest where debts are paid off much quicker. However, on the other end of the spectrum are credit builder credit cards; though they usually charge steeper interest, consistency in repayments builds up ones credit rating. Prompt repayment leads to negligible or no interest, and this acts as an incentive as these cards usually target those with limited or poor credit reports.
In various countries, purchases made between set parameters are usually protected by legislation such as the Consumer Credit Act, which provides purchase protection for anything above £100. This means that if the item is faulty, misplaced or even if the transaction goes awry, one can lodge a claim with the credit provider. This feature is however availed after proof that the loss was not due to negligence; within certain terms, one can also claim a refund if the card happens to be used in fraudulent deals.
Demerits of credit cards
Unlike their cousins the debit cards, which works with only the available account balances, credit cards are more like loans, allowing one to make purchases on credit. For all the conveniences offered, credit cards usually charge high-interest rates which are usually compounded and delays in repayment lead to the building of interest. This increases the possibility of debts that one struggles to pay back. Different credit card providers offer different amounts of grace period where one can pay back their balance without accruing any interest. Introductory interest rates, used to lure first-time card users are usually limited to a set period (commonly 6-12 months) may at first seem good but the rate rises after that time elapse, and if caught unawares, the ballooning debt may lead to bankruptcy.
Most credit cards come with monthly payments, and interest is compounded monthly, this means that missing payments leads to higher amounts. Defaulting or delaying payment can wreak havoc on a card user’s credit rating; if one’s rating is less than favorable, it becomes harder to access credit. Exceeding the credit limit can lead to other fees and levies that add to the burden of the credit balance repayment.
When signing for a credit card, it is recommended that one reads the fine print and the terms and conditions in the agreement. There may be surcharges when using the card for cash withdrawals, and some cards have restrictions on how and where to use them. When travelling out of the country, it is necessary to check with the credit card provider on the use of the card in different countries.
With all this in mind, deciding on how to use a credit card appropriately, as well as how to manage finances becomes easier. Thus, avoiding unnecessary issues in regards to the finances.
Credit Cards – The more you know.
