Credit Cards: Pros & Cons
December 17th, 2009
Learn what the pros and cons of credit card ownership are, so that you can better manage your credit card on a day-to-day basis.
There are many pros and cons to owning a credit card, and understanding these is crucial if you are to make your credit card work in your favour. The main advantage is the convenience of being able to pay for goods or services without handing over cash. The main disadvantage is the possibility of ending up in debt from overspending.
Best All-Round Credit Card
With the HSBC Credit Card feel safe knowing that you have a very good credit card, with an excellent introductory offer of just 0% p.a. for 6 months on balance transfers and no annual fee for life
- Purchase rate of 16.99% p.a.
- 0% p.a. for 6 months on balance transfers
- $0 annual fee
- 16.99% p.a. on purchases
- Up to 55 days interest free
Click here to read the HSBC Credit Card terms and conditions
Credit card pros:
Flexibility
Credit cards are perfect for those occasions when an unexpected purchase becomes necessary, and sufficient cash is not available. They also allow for quick and simple phone and Internet transactions, and prevent the need to carry large amounts of cash around with you when shopping on the high street.
Safety
Lost or stolen cash is gone forever. If your credit card is lost or stolen, the card will be replaced, and your maximum liability for fraudulent use is limited by law to $50, although Visa, MasterCard and American Express all operate zero-liability policies provided the customer has observed a few basic rules and has not been reckless.
Spending power
Credit card credit limits mean you are able to to buy items and pay for them over a period of time, when personal cash-flow may not allow for a cash purchase at that particular time.
Worldwide acceptance
Visa and MasterCard credit cards are accepted at nearly 30 million merchant locations worldwide.
Records
Credit card transactions create paperwork that is useful if problems arise with the purchase. Your credit card provider can sometimes step in to help, or cancel the transaction on your behalf.
Extra perks
Gold and platinum credit cards offer a range of complimentary perks including travel insurance, purchase protection and extended warranties.
Rewards programmes
Credit card reward programmes mean you are rewarded for spending on your card, earning points towards such things as flights, retail rewards, and cashback.
Special offers and rates
Credit card providers will often announce special offers with partner or “bonus” companies, and regularly allow new or existing customers to make balance transfers at preferential rates.
Credit card cons:
Overspending
This is the biggest drawback with a credit card – the ability to spend beyond your means. Getting carried away can lead to a debt that may last for many months, if not years. Careful budgeting and a sensible attitude must be exercised to prevent this happening. The extra interest you may end up paying can mean your initial purchase becomes extraordinarily expensive in the long term.
Using the card in too many ways
A credit card should be used for just one thing. A zero rate of interest balance transfer credit card should not be used for purchases. This causes problems because the lower interest debt is always paid off first, meaning your higher interest purchases keep accruing interest, waiting in the payment queue. It’s called the adverse order of payments, and you should not let it catch you out.
Losing track of finances
You must make sure that you are aware how much spending you are putting on your credit card, and that you are putting sufficient cash aside to cover the debt at month-end. Spending on a
credit card
should not make you feel you have extra cash you can fritter away on non-essentials. This is the path to serious debt.Editors Choice: Best Credit Card Deals
| Credit Card | Card Details | Interest Rate p.a. | Cash Advance Rate p.a. | Balance Transfer Rate p.a. | Annual Fee | Interest Free Days (Up To) | |
|---|---|---|---|---|---|---|---|
|
An excellent balance transfer offer of 1.9% p.a. for 12 months and a standard purchase rate of 12.24% |
12.24% | 17.99% | 1.9% for 12 months | $39 | 0 | |
|
Excellent credit card, with a 0% p.a. for 6 months balance transfer offer, and pay $0 for the life of the card |
16.99% | 20.75% | 0% for 6 months | $0 | 55 | |
|
Enjoy 1.9% p.a. for 12 months on balance transfers as well as earn 3 Skywards Miles for every dollar spent, plus all the benefits & privileges of a platinum card. |
20.74% | 20.74% | 1.9% for 12 months | $229 | 55 |