The Pros and Cons of Using a Credit Card for Everyday Expenses

A credit card has both pros and cons of its own, it’s not wrong to say it has become an indispensable part of our lives. It provided us the ease and convenience we find difficult with financial back-up options.  Many websites like Amazon and other e-commerce websites provide enormous discounts, offers, and deals when one pays via credit card. However, it has pros and cons that can’t be ignored if not used widely, or if you spend more than the capacity to repay then your bill exceeds and it may reach to the extent that your credit may be down in the market.

Pros of using credit cards:– 

1. Building a line of credit:– Credit cards can offer the chance to build up a line of credit. It is very crucial as it allows the bank to credit any loan your credit can be assumed by the active credit history. Active card history is based on card usage and repayment. Credit cards work as a credit for one and even banks and financial institutions often prefer credit card history. 

1. Easy to access:- One of the essential advantages of the credit card is it’s easy to access. Credit cards are based on deferred payment which means if you purchase your goods today you can pay later for that purchase.  It is a secure and easy process. 

1. Offers and Discounts:- Credit cards sometimes come packed with discounts and offers. And credit increases with the time one uses. Many e-commerce websites while purchasing via credit card offer some reward points. These reward points can be accumulated and used later for discounts. Reward points are offered every time one swipe. Credit card discounts are provided by lenders on purchases like large purchases, holiday bookings, flight bookings etc. 

1. EMI facility:- Suppose you desire to purchase something but don’t want to lose your savings on it. You can choose the option of paying via credit card. In this, you can pay for the purchase in monthly instalments which can be less than a one-time payment. Even paying through EMI is an easy and cheaper option rather than taking a loan to pay for the desired purchase. 

1. Record of expenses:- When you pay through Credit cards it maintains all the records of your purchases with detailed information and with monthly statements. This feature can be used to track purchases and track of spending. It can also be used at the time of calculating your budget or paying taxes. An alert is always given by lenders the moment you swipe the card about the credit limit.

1. Flexibility of credit:– The flexibility of Credit cards can be determined by the fact that it is interest- free. If you pay your payment before the completion of the payment’s last date within a short-term which is known as a short-term credit card bill, that ranges between 45 to 60 days, it can be availed free. 

1. Purchase with secured protection:- It is protected in the form of insurance for any card purchase. The statement of credit card can be used for future claims if any issue arises. 

Cons of using credit cards:-

1. Interest rate:- When you don’t clear your loan before the due date or at the due date interest is charged on the loan and whenever you will repay the loan the interest rate will also be added to the loan amount. This high interest rate is accrued on the period that is after the interest-free period.  As mentioned, rates are quite high. Estimated average rate can be 3% per month and 36% per annum. 

1. Due trap:- One of the biggest cons of the credit card is a minimum due trap which means the amount that is displayed on the bill statement at the top is the minimum due amount. It is not the total due amount many credit card holders are deceived by the same. It is the least amount that the company thought that you would pay to continue the benefits of Credit cards. 

1. Costs hidden:- At first using a credit card might seem easy and simple but at the outset, several charges are usually hidden and when the total amount is calculated it increases the expenses. It has several taxes and if late payment then a large interest and fees, renewal fees, and joining and processing fees. In the matter of a missing payment, could result in a penalty. If you are unable to repay simultaneous loans and they went over the due date it may lead to a shortening of credit card limits. It could impact your credit score and where you can achieve benefits from the bank you can not rely on completely. 

1. Overuse:- By keeping your bank balance the same but with a revolving credit, it might be tempting to put purchases on your card. In this, you are unaware of the debt that is bagging up. This debt can lead to overspending or owing.

1. Fraud:- This con is not very common, there are chances of credit card fraud. Due to developments in technology, there are many chances of cloning the credit card. The leak of confidential information increases the chances of fraud. While checking your statement if anything looks suspicious you must immediately inform the bank. Usually, banks waive off charges if the fraud is proven.

Conclusion 

If you want to avoid the debt-laden you must read the fine print so that all the charges that are included must be known to you that govern your card. You must know the capacity that you can lend and repay overspending may lead to debt. You must avoid daily purchases on your card. This can track your purchase. There should be a period check on your credit card if you cross a 40% credit limit. You have to choose an EMI option for a large purchase. You must set a limit of 40% that can be used in case of an emergency. To avoid interest charges keep in mind to pay your credit card loans. These are some of the tips you must follow to avoid the disadvantage of using a credit card for everyday expenses.