A credit card can really lend a hand in times of difficulty, however, as many benefits, as a credit card offers it has its downfalls too, and in order to use it correctly so that it becomes your friend instead of being an enemy who holds you back by hanging a debt over your head, you need to know and understand both pros and cons of the credit card so that you know what to do with your credit card and what not to do.

Advantages of Credit Cards:

Convenient:

Credit cards are the most convenient financial tools, cardholders can make purchases and get whatever they want without worrying about their monthly budget. Most credit cards also offer a grace period where users can make a significant purchase without incurring any interest.

Rewards:

One of the most popular benefits of credit cards is that it provides numerous rewards on your transactions, therefore you can purchase anything you like and on top of that you’ll be earning a reward for that purchase. Many top banks like Axis Bank, SBI, Citi, HDFC, etc offer incredible rewards programs.

Helps in building credit:

If used correctly credit cards can help you build credit, and raise your credit score. If you want to improve your score, you should remember to make on-time, complete payments on all of your bills, keep your credit usage ratio low, and other things. You can benefit in many ways from having good credit, such as being eligible for better credit cards and low interest rates on loans.

Disadvantages of Credit Cards:

Can lead to overspending:

With the convenience it offers, credit cards often trick users to spend more than they can afford o pay back. People often forget that the money they are spending through the credit card is borrowed money, a loan, which they eventually have to pay back with interest.

High-interest rates: 

Using money that you do not have sounds like a dream, however, as mentioned in the point above the money that you use through the credit card has to be paid back, but the catch is the issuer will charge interest on the used money, and the interests charged are quite high.

Minimum due:

At the end of the billing, cycle cardholders have to clear all the due and settle the balance in full, however, if you cannot settle the balance in full the issuers give you the option to pay a minimum amount. As incredible as that sounds, this option is the reason why so many people fall into a debt trap every day. This is because on the next billing cycle the interest is going to be added to the remaining balance, and it will go on like this for as long as you make just the minimum payments.

Read More: Myths About Credit Cards You Should Not Believe

Bottom Line:

As many advantages, a credit card offers there is an opposite side to it too, therefore while using a credit card you have to maintain discipline. Pay your bills on time, try to settle them in full, stay under your credit utilization percentage, and use your credit card responsibly so that it will help you through your journey and not cause hurdles along the way.