Advantages To Carrying A Credit Card Over Cash

There is a lot of controversy over the use of credit cards vs. using cash. Cash proponents claim credit cards can cause extreme debt and financial disaster for American families. On the other hand, credit card supporters insist the trouble is not the card itself, nor the system behind it, but lack of financial responsibility on the part of the user. Both sides contain a measure of validity. The best way to understand the advantages of owning or applying for a credit card is to learn the credit card benefits and potential pitfalls that accompany such ownership.

The benefits of using a credit card can be quite numerous as long as the applicant understands the terms of usage, the interest rate, the contract fees, grace periods and the concept of the variable rate when applying. Credit card benefits include ease of use, emergency funds, interest-free short-term loans and accessibility. The most financially sound of all credit card benefits is the grace period. This allows the cardholder to make interest-free purchases without paying interest on the borrowed money – as long as the complete balance of these purchases is paid within a very short time frame. In case of emergency, a card can supply the cardholder with the funds necessary to offset some of the trauma and facilitate peace of mind. In addition, many services are not accessible without the use of a credit card, such as car rental. Despite the expanse of benefits, however, credit card pitfalls are just as high in number.

Applying for a credit card is easy, and obtaining one is not difficult either. Yet many financial counselors advice against the use of such easily attained credit. Without careful planning, credit card benefits can easily turn into disasters. The average cardholder does not have sufficient financial training to use a card responsibly. Ease of use leads many borrowers to overspend with the intention of catching up later. When unexpected financial situations arise, the cardholder is often already overextended, with no backup plan in place. The terms of use on many card plans carry high default interest rates, meaning missed and late payments allow the card issuer to immediately apply an increased interest rate to the total outstanding balance of the card. This results in higher monthly payments and an extended period of debt. However, an education in financial planning can protect the consumer from such hazards.

Responsible credit card use carries many benefits for the cardholder, while irresponsibility can cause financial disaster and ruin credit ratings. Before applying for a credit card or making any other financial decision, it is important that consumers educate themselves on the proper use of these financial tools, and stick to using cash until doing so.