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A credit card earns the user an amount of credit that could be easily utilized just like actual balance in the bank accounts. The process is really easy to know- spend out within the limit of the card and then pay back the amount in installments. Spend and then pay back wisely on time, do this with all your credit accounts so as to raise the credit limit by maintaining the best scores.
Young adults more often stick to using credit cards for enjoying being financially independent. An abundance of options is available nowadays to borrow the funds, buying supplements, purchasing specific products or any service thus becomes really easy.
Credit cards offer multiple advantages over the cash and debit cards, surprisingly, it is now one of the most popular payment methods used among consumers. It is a great responsibility to handle and use the credit card, certain challenges could appear if used in an unknowing way.
There are many ways in which credit cards could assist yet there are different pros as well as cons that must be known to every user. Let’s figure out those positive’s and the negative of utilizing the credit cards.
PROS of Having Credit Card(s)
1. Easiest Way to Build Credit that Is Usable in Real-time
All the recorded history of borrowing and repaying back the credit in all accounts helps determine or define the credit score. There is a credit reporting agency that gets all the recorded historical data from your credit card company so as to calculate the credit scores. Lenders assign the interest rate as well as the credit limit based on the credit score. It is not difficult to build the credit limit as keeping a check on a credit score could be done through on-time paybacks, long term stable borrowings.
2. More Secure than Cash
Obviously, borrowing cash could catch mistakes and lot more work but credit cards are completely online and this makes it a more secure mode of carrying credit rather than cash. Lost your card? Just place an inquiry and it would block the transactions through the card. Comparing with the cash- Once it is lost or stolen then it is almost impossible to recover it back. There is nothing better than using credit cards if the security of your balance is your first preference.
3. Frequent Cash Rewards and Offers
Almost all credit card companies tend to avail offers like cash back, discounts on flight tickets, etc. Utilizing the credit card on a regular basis could easily add up insane amounts to the limits.
CONS of Having Credit Card(s)
1. High-Interest Rates on Borrowings
APR or the Annual Interest Rates on the borrowings is way too higher. Not paying back your balance could add up fine or charges causing the quick rise in existing debt. Overall, the interest rate, as well as the additional charges on late paybacks, are way higher on the borrowings as well as the purchases.
2. You Could Fall Badly
You get access to more funds and this raises the chances you might buy some expensive products or make costly purchases. On the time of payback, you might fall back badly as you may not be able to afford such a high-interest rate and the installments. Beware of making such mistakes or you shall be unable to recover your financial health back for a long time.
3. Too Many Credit Cards Tend to Destroy the Credit Score
Open only a reasonable number of credit accounts as too many accounts can cause an imbalance in your trackbacks by the scoring authorities. More cards mean a higher probability of getting multiple cards not used for a long time. This causes a signal to the scoring authorities where they shall put down the scores and deplete the credit limits on working cards as well. Prevent this negative effect by keeping only a few numbers of cards or credit accounts.
Financing large purchases or to borrow money anytime, credit cards prove to be useful realistically. Pay-off the borrowed/financed amount over time in easy installments. Precautions- Credit cards could burst your inner self to spend more than your mealtime earnings, all your financial health could be eroded if used irresponsibly. Right before incorporating credit cards ensure that you put some focus on all the advantages and disadvantages.
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