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We’ve covered five positive things about credit cards, but we all know there is lots of potential to use a credit card incorrectly, which can put your financial health in danger. Here are five cons of owning a credit card, and how to avoid them and ensure your credit card debt doesn’t get out of hand.
Owning a credit card can give one a false sense of how much money they have. A credit card with a high limit can give the illusion that you can afford to make unnecessary and excessive purchases that you may not be able to afford. Credit cards are not ‘free money’ or an endless line of credit. They will always need to be paid back, and with interest, you can actually end up paying even more for your items that what they are worth. Try to stick to the rule that if you wouldn’t buy it with cash, don’t buy it with your credit card.
If it’s your first time using a credit card, you may not have considered how to use one responsibly. You may not have considered that it should be used in a different way to your debit card. Do some research on how to use credit cards responsibly and to your advantage before running to the bank to sign up for one.
Nobody likes the idea of paying more than you spend, but the reality of credit cards is that you often will. Before choosing a credit card, do some research on banks in your area to compare interest rates and what they’re offering. The only way to completely avoid paying excessive interest is to pay off your credit card bills on time, in full every month. This will require discipline each time the bill arrives, and will mean that you can only spend well within your means each month.
You may think that a credit card is the way to get on top of your debt - that you can pay off bills and make purchases with a line of credit instead of your dwindling savings. This may sound like a great idea, but in fact, it’s quite dangerous, and could ruin your financial health further. Credit card bills can get out of hand quickly, and having more debt to your name will not help in the slightest. If you need help getting a handle on debt, talk to one of our consultants.
These days there are many alternatives to a credit card - they are no longer the default tool used. Instead, we have access to different variations of debit cards, including those that can be used in the same way as a credit card. We also have access to services such as PayPal, which give us the freedom to shop online without the use of a credit card.
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