Advantage and Disadvantages of Credit Cards

Credit cards have become a vital part of our financial lives. They provide convenience and immediate emergency debt. However, handling them wrongly can also produce unpleasant results. 

We talked to financial experts to discuss the various pros and cons of credit cards. So, before you consider getting a credit card, or even if you already possess one, you should know all the benefits and pitfalls of using credit cards.

According to Sviatoslav Mykytyn, Marketing Specialist at lawrina.com, the pros of credit cards include...

1. A credit card is safer than carrying cash. If you have lost your credit card or see that fraudsters are trying to counter various financial frauds, you can easily block it by contacting the bank.
2. If you have a good history of credit accounts and constantly paid everything on time, then this way, you will create a good credit rating. In this case, the bank will be able to provide you with larger loans, even for a mortgage and a car. 
3. You can request a refund if you do not like a product. You can request a refund via a credit card bank if you dispute with the seller or online store.
4. You can make purchases abroad and in foreign currency, although a conversion fee is usually charged.
5. Credit cards can provide emergency assistance if you have an unforeseen situation and lack funds. But it should be remembered that the funds need to be returned.
6. You may need a credit card when traveling. After all, in the modern era of ticket and hotel cancellation is due to a credit card. Moreover, many credit cards also include various insurance options, including insurance against accidents and loss of luggage or cancellation of the trip. 

According to Sviatoslav Mykytyn, the cons of credit cards include...

1. High-interest rates. Purchase and cash advance interest rates can be as high as 22% APR. so you can pay hundreds of times more than you paid interest if you can't repay monthly. 
2. Credit card fraud. There are several different fraudulent schemes targeted at your credit cards. Modern theology allows fraudsters to use various phishing techniques and other devices to steal information about your card and your money. 
3. Use a credit card to know cash. If you are trying to withdraw some money from a credit card, you should keep in mind that it will attract a cash advance fee worth around 3% of the total transaction amount.
4. Other fees. You may be charged commissions if you miss a payment if you spend a credit limit or transactions abroad. 

Also, many people are often very obsessed with credit cards and, having spent the entire credit limit, are unable to repay it. 

Conclusion: there are many pros and cons, but choosing what to give preference ultimately depends on you and your needs.

According to Luke Zhang, Founder of Dunk or Three, the pros of Credit Cards include...

I’ve had credit cards for ages, and I love how it gives me purchasing power worldwide – locally and overseas, and online, by phone, and at stores. 

The best part of having a credit card is that you can buy now and pay later. I realized this when I was getting my car repaired. Draining my checking account was not a good idea because once that money is gone, it’s gone. Instead, I paid the money through my credit card and paid the balance over time. 

Another amazing thing about credit cards is they have better protection against fraud. An irresponsible person like me could end up losing every last penny if it weren’t for the credit card.

According to Luke Zhang, the cons of Credit Cards include...

Drawbacks of Credit Cards make me want to throw them away. One of the most obvious drawbacks of using a credit card is paying back interest. Once I couldn’t pay off my balance quickly, so a high APR dragged me deeper and deeper into debt. 

Then comes the late fees. Miss a payment, and you’ll pay a late fee. Using a credit card while shopping seems fun, and swiping a little piece of plastic doesn’t seem like a big deal. But when I’m not careful, I fall into suffocating debt easily, and that’s why this ease of spending has lots of cons.

According to Kidyba Iryna, Financial Manager at allianz market, the pros of credit cards include...

A credit card is a handy tool for getting money and making cashless payments. However, you need to know not only the advantages but also the disadvantages when using it. 

To begin with, let's look at the main advantages and disadvantages of credit cards. The advantages of this product include the following parameters: 

1. Grace period. This is called the period during which the credit card can be used without interest. If you pay back your debt in full during this period, you can use the card without overpaying. The grace period can last from 50-55 to 100-200 days.
2. Revolving line of credit. After you repay your debt, you can use your card again under the same terms. The credit limit is constantly renewed until the card is closed. 
3. Versatility. You can issue a credit card for any purpose - for daily use, payment for big purchases, for travel, or as a reserve. The Russian market offers a lot of proposals - it is easy to choose from them a suitable credit card for your purpose.
4. Bonuses for purchases. Banks introduce a variety of bonus programs for credit cards - cashback, accrual of Points, discounts, and others. This is how they encourage non-cash purchases with cards. 

According to Kidyba Iryna, the cons of credit cards include...

That said, the credit card has several disadvantages to consider: 

1. High-interest rates. They can be two or three times higher than a consumer loan with similar terms. The rate depends very much on the solvency and reliability of the borrower.
2. Restrictions on certain transactions. A credit card usually does not allow you to withdraw cash or transfer money. The bank charges a high fee for these operations and sometimes stops the grace period and increases interest.
3. Fraud risk. Credit card security should be monitored very carefully. If the credit card or its details fall into the hands of a fraudster, you risk a large debt to the bank.
4. The psychological aspect. Proper use of a credit card requires a certain level of financial literacy and the ability to plan your spending. If you spend more than you earn, use the card improperly, and don't make payments on time, you could end up with a very large debt. 

According to Jacob G. Sensiba, Investment Advisor CRG Financial Services, the pros of credit cards include...

Credit cards have rewards. The more you spend using your credit card, the more rewards you get. You can earn things like points, money back, and airline miles. You can use those points to get gift cards, plane tickets, hotel stays, concert tickets, and more. 

The other benefit to having and using a credit card is improving your credit score. It creates another account (number of accounts is a factor), gives you an opportunity to increase your on-time payment record (number 1 contributing factor), and gives you the ability to keep your credit card utilization rate low (number 2 contributing factor).

According to Jacob G. Sensiba, the cons of credit cards include...

If you're not responsible, you can end up in debt really fast. That debt can end up hurting your credit score. A credit card utilization rate over 30% will hurt your score. One missed payment will hurt your score. 

Also, if you carry a balance from month to month, it's costing you money. If you have a balance of $1,000 and an interest rate of 19%. Say you carry that balance over to the next month. The credit card company will add another $15.83 to your balance (1,000 x 19% / 12).

By the way, the utilization rate is how big your balance is compared to the credit you have available. If you have $10,000 of credit available and have a balance of $3,000, then you have a utilization rate of 30% actively and only by people responsible enough to pay their balance off every month.

According to Katherine Brown, the Founder & Marketing Director of Spyic, the pros, and cons of credit cards include...

The advantages of credit cards I enjoy are that they help me make purchases without cash or checks, and most establishments (like gas stations) will offer discounts when the purchase is made with a credit card instead of with money. 

The disadvantage is that paying off all the purchases made with credit cards can be a hassle since most establishments do not offer rewards or discounts for using credit cards instead of cash.

There are also advantages and disadvantages of using credit cards for foreign currency exchange. I personally use them when I am going overseas, where we can only use US Dollars or Euros. I use them instead of traveler's checks. 

The disadvantage is that most of the time, they charge a fee per purchase. Another advantage is that you can use them to buy things from other countries, like souvenirs and such.