What are the Advantages/Disadvantages of Credit Cards?
Don’t get sucked in by the advantages of credit cards – there may be drawbacks too once you read the fine print!
Advantages of Credit Cards
Less cost effective if borrowing for a short-term period – Personal loans can be expensive to borrow than if you borrowed the balance off a credit card. The interest is paid on the remaining debt only, not the whole loan.
Flexibility – You can pay small amounts each month or can pay up to the total balance. There are no redemption penalties – If you paid off a loan earlier than contracted, you would come across a redemption penalty.
Credit is Interest-Free – Normally, up to 60 days interest free credit.
Telephone and Internet shopping – With this you can purchase items remotely.
Extras – With credit cards you have more benefits such as, insurance cover when buying an item, cash back, air miles and can save on holidays when booking online.
Advantages look great, but what about the Disadvantages?
Higher rates on cash withdrawals – If you withdraw money out the cash point, it can be much more cost effective.
Credit limit exceeded – You are only limited to a certain credit limit.
You could get into worse debt – credit cards offer a feature, which can make people, spend more than what they can actually afford.
Fraud is easier – When using your credit card remotely, you have a higher chance to be a victim of fraud as card details may be taken and used by a third party.