Credit cards are no different from other things because they all have pros and cons. We’ll require cards later on in life for financial needs, and credit cards are one of those. Credit cards have become a crucial part of our lives because of their ease of use and valuable pay-back options. They provide discounts, offers, and deals unsurpassed by any other financial good and are a gold mine for the experienced user. The Chase Freedom Unlimited review might be your answer to knowing what credit card fits you most. However, they can become debt traps if misused or if you charge more than you can afford to pay back when the bill comes.
Regardless, you should keep in mind that a credit card will never harm your financial health if and only if used wisely. It will even help you get out of financial trouble instead.
Before adding a brand-new card to your wallet, consider these top benefits and drawbacks.
Easy-peasy access to credit
Using credit cards without carrying large amounts of cash is convenient. The ability to easily access credit is a credit card’s primary benefit. Since credit cards operate on a deferred payment basis, you can use one now and pay for your purchases later. No money is taken out of your account every time you swipe, so your bank balance is not diminished.
Incentives, offers, and rewards
Most credit cards include plenty of incentives and promos. When you swipe your card, you can accumulate rewards points that can be exchanged for money back, airline miles, or credit against a debt due on your card. To help you save money, lenders also provide discounts on purchases made with a credit card, such as on plane tickets, vacations, or significant assets.
If you do not want to spend all your money on a purchase, you can put an extensive buy on your credit card to postpone payment. Additionally, you can pay for your investment in equalized monthly installments (EMI) to avoid paying it off all at once and depleting your bank account. Using an EMI payment plan to pay for expensive home electronics is more cost-effective than taking out a personal loan.
Protection and security
A dependable and safe method of payment is using a credit card. Compared to other financial products, they provide many more safety features. Even though a debit card offers a comparable level of security, you will have to wait until the problem is examined before receiving your money back. If you wish to return a damaged item or dispute a charge, your credit card could help.
If you make a purchase and don’t pay for it immediately, you must pay the initial purchase price plus interest. In other words, you will eventually spend a little more on everything you buy if you have a balance. With an average interest rate of 3% per month or 36% annually, credit card interest rates are pretty high.
Costs that you don’t know
Despite their initial impression as straightforward, credit cards have several hidden fees that can dramatically raise the overall cost. Late payment, membership, renewal, and processing fees are just a few of the taxes and expenses related to credit cards. If you repeatedly make late or missed payments on your cards, your credit score and future credit prospects may suffer, which could lead to a reduction in your credit limit.
Minimum due trap
One of the significant disadvantages of using a credit card is the minimum due amount. Many credit card users, especially first-timers, mistakenly believe that the minimum payment represents the total balance owing on their account and fail to make the required full payment. Customers frequently overspend and pay high-interest rates because they believe their credit card balance is low. Therefore, users are trapped.
Easy to overuse
Credit cards are so simple to use, making it easy to overspend. Credit cards provide you with a lot of credit; therefore, there may be times when you overspend on unnecessary things and later find yourself in debt.