Credit Card – Financial Advantages and Disadvantages – Tips
And when does the credit card become more of a threat than a benefit? How to know if using it is beneficial to your pocket or not? We are so used to using credit cards on a daily basis that we don’t ask ourselves these questions. You have to stop, think for a moment, put it all in the balance, and understand that today’s credit card may seem like a great ease, but when mismanaged it has the potential to become a serious threat to your family’s financial balance. We have gathered the opinion of several economists and created a list of the advantages and disadvantages of credit cards, as well as tips for not falling into traps.
1. Lack of control over spending
When we pay in cash or cash in debt we notice our hard-earned money going away. Now, when everything goes to an invoice that we’ll only see next month, we overdo it. With easy credit and a longer payment deadline, it is so comfortable that many people are out of control and overly indebted.
2. False feeling of having money. impulse buying
The fact that the card offers a good limit brings a sense of power, but not quite. Your revenue does not increase because of it, and you have to pay every dime you buy. or even more depending on interest. Facilities such as installment payments tend to generate higher propensity for impulse consumption. Many people do not even realize that they are spending too much and do it irrationally.
3. Very high interest (nearing 400%)
The sum of high revolving credit interest and installment payment in the event of non-payment of the total bill can be catastrophic for a person’s financial health. And all this is boosted by an interest rate close to 400% per year.
Take advantage of the new revolving credit rules:
4. The Minimum Pay Trap
Making the minimum payment is pushing the problem with the belly. You will only be postponing the problem and adding more mass to the snowball that will form over time. With the new credit card rule, the impact has been somewhat mitigated, but anyway, by paying the minimum in one month, you already assume a debt with high interest rates that must be repaid.
5. Lend the card
By lending your card you compromise your name and even the friendship you have with someone. The borrower has his reasons. You may have breached your card limit and this already identifies a person profile that does not control your spending. Will she really pay you?
You can often come across this request from family, relatives, or friends. As much as you know the person, remember: if they don’t pay, you will be responsible for settling the account.
1. Deadline to pay and install without interest
When used well, the credit card can give us a longer time to pay for the purchase itself. You can achieve something you desire without having to wait until you collect money. Another issue is that if you are a well organized person, you can keep more capital invested and earn interest by applying your money during the installment period.
2. Easy to pay
You make purchases easily, just enter the password if the purchase is in physical stores. Already in the virtual world, with an international card in hand, it is possible to shop anywhere in the world.
3. More security
Walking with money in your pocket is quite complicated due to the violence of cities. With credit cards, the risk does not end completely, but greatly decreases.
4. Bonuses and Miles
Many credit cards have relationship programs that allow you to exchange for airline tickets, various discounts and even allow you to exchange points for products or services. Today, there are sites where you can sell your miles if you don’t want to trade for anything. This is a great advantage for those who know how to enjoy properly.
5. List of related invoice purchases
That means more organization. The credit card bill is a hand in hand as the expenses are all broken down. Thus, those who do not have the habit of noting and tracking spending on a spreadsheet or application receive a monthly report. Some cards even help categorize expenses by showing reports by category and graphs.
Credit Card: Use With Conscience
Generally speaking, there are two groups of people with very distinct financially behaviors: the organized and the disorganized. These profiles are very much reflected in credit card usage.
For the more organized card can be a great ally, as they take advantage of the advantages they offer and never get carried away by consumer impulses. Already the disorganized should avoid using the card, as it can become a weapon of consumption in the hands of people who do little planning, culminating in a cycle of debt and default that tends to turn the famous snowball.