The Good and Bad of Credit CardsFebruary 5, 2011 - 8:53 am
You’ll find people on both sides of the fence about credit cards. Some people say they’re the best thing since sliced bread and other say they should be avoided like the plague. There are good and bad things about credit cards. Use both in your decision to apply for a credit card.
Good: Credit cards are convenient.
Using a card for a purchase is a lot easier than using cash and writing a check is simply outdated. Technology has made payment processing lightning fast. Using a credit card keeps you from having to go inside the gas station to purchase your gas. It also allows you to make purchases over the phone and internet. With cash and check you can’t do either of those things.
Bad: Credit cards can be a little too convenient.
Many people get in trouble with credit card debt because it was just too easy to use their credit cards. You don’t really know how much you’ve spent or how much available credit you have. That makes it easy to run up a balance you can’t afford to repay. It takes an extra level of discipline to use credit cards over cash because you can’t see or physically count what you’ve spent.
Good: Credit cards offer theft protection.
Federal law protects cardholders against credit card fraud. In most cases, you’ll only ever be liable for $50 in fraudulent charges. Many credit cards for $0 liability fraud protection. If your cash is stolen, on the other hand, it’s done forever. There will be nothing you can do to recover your funds unless you find the person who stole your money and somehow get it back from them.
Bad: Hidden fees.
Credit card companies are required to disclosure fees but that doesn’t mean cardholders always understand what’s being disclosed or even that they’ve read the disclosure. Fees are often buried in credit card agreements and change notifications making it hard to know when you’re going to be charged. Certain fees you won’t discover until you see them on your credit card statement. That makes it hard to use your credit card for free.
Good: Rewards for spending.
Many of the best credit cards offer rewards based on your purchases. Reward programs let you earn cash back, points that can be redeemed for merchandise, or miles you can use toward airline tickets and hotel stays. If you’re a big credit card user, you can earn more rewards and more free stuff.
Bad: Annual fees.
Not all credit cards charge an annual fee. Some credit cards that do have an annual fee will waive it if you spend a certain amount on your credit card in a year. Credit cards with the best reward programs usually have the highest annual fees which means you’ll have to accumulate rewards in excess of the annual fee to really get a benefit.
Take the Good With the Bad
It’s all about how you use your credit card that can make it good or bad. In nearly every case, you can successfully manage the bad aspects of a credit card and reap the benefits of using credit.