What Are the Advantages of a Credit Card?
A credit card is a convenient way of paying for things you want to buy. With a credit card, you don’t have to carry around cash or coins, and there aren’t any transaction fees involved.
You can use it anywhere that accepts MasterCard or Visa debit cards, including restaurants, stores, gas stations, and online retailers. And, unlike debit cards, credit cards offer rewards programs that give you points or miles based on how much money you spend each month.
Here are just some of the advantages of having a credit card:
You can pay for everything with one card when you’re out shopping. There’s no need to pull out your wallet every single time you make a purchase. Plus, you won’t have to worry about carrying large amounts of cash around.
2. Rewards Programs
Many credit cards come with reward programs where you earn points or miles for spending money. These points can be redeemed for gift cards, merchandise, airline tickets, and other perks. Some cards even allow you to redeem points for cash back.
3. Travel Packages
If you plan to travel soon, a good credit card might help you save on airfare. For example, Chase Sapphire Preferred offers 50,000 bonus points when you spend $4,000 within three months. Those points can be combined into a free roundtrip ticket on Southwest Airlines. Other cards provide similar perks.
4. Purchasing Big Ticket Items
If you want to purchase something expensive like a TV or car, a credit card could be a better option than borrowing the money yourself. Most major banks offer 0% APR financing for up to 12 months for purchases over $5,000. This makes it easier to afford those pricey electronics and vehicles.
5. Emergency Funds
Access to emergency funds is a massive benefit for people who live paycheck to paycheck. Cards like the Discover More Everyday® Card let you set aside money to cover unexpected expenses without charging interest.
6. No Fees
Unlike debit cards, which charge a fee for using them at ATMs, credit cards don’t charge ATM withdrawal fees. That means you’ll never have to pay an extra fee if you withdraw cash from an ATM.
7. Lower Interest Rates
The average rate for a credit card is usually lower than the average rate for a personal loan. So, if you’re looking to borrow money, consider applying for a credit card first.
A credit card lets you build a credit history so that you may qualify for better rates in the future. And, if you cannot repay your balance, most credit cards will not report your account as delinquent or closed until after 30 days.
Credit cards require a signature to authorize transactions, so they provide more security than debit cards. Debit cards work by connecting directly to your bank account, so someone else needs to swipe your card before making a purchase physically.
10. Online Shopping
Credit cards are great for online purchases because you don’t need to enter your PIN for every purchase. Instead, you only need to type in your username and password.
11. Cash Back
With many rewards cards, you can earn cash just by paying with that card. You can then use the money back to offset any charges on your statement.
12. Low-Interest Loans
If you’re having trouble paying off high-interest loans, you may be able to get a low-interest personal loan through a credit union instead.
13. Balance Transfers
If you’ve already got a personal loan, you can transfer some of the outstanding amounts to another card. This way, you won’t accrue additional interest while you pay down the original debt.
14. Fraud Protection
In addition to protecting unauthorized purchases, credit cards protect consumers against fraud. They do this by monitoring activity on your accounts and freezing suspicious transactions.
15. Rewards Programs
Many credit cards come with special reward programs. These include airline miles, hotel stays, gift cards, merchandise discounts, and cash back.
16. Auto Insurance Discounts
Some insurance companies offer savings to customers who carry certain types of credit cards.
17. Student Loan Consolidation
If you have multiple student loans, you can consolidate them into one monthly payment.
18. Travel Rewards
Some credit cards offer travel rewards such as free flights, hotel stays, car rentals, and cruises.
19. Gift Cards
Want to give a loved one something special? Please give them a gift card!
20. Medical Expenses
If you’re having medical problems, you may qualify for reimbursement coverage under your health plan.
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Disadvantages Of A Credit Card
1: No Interest-Free Periods
Most credit cards don’t have any interest-free periods. That means you will be charged interest if you carry a balance.
2: High Annual Fee
The Discover it® Secured Card has a high annual fee. However, there is no minimum monthly payment required.
3: Limited Rewards Programs
Some credit cards don’t offer rewards programs. If you want to earn extra money, you should consider other options.
4: Poor Customer Service
Customer service is not always excellent on some credit cards. Some cards charge fees just for using their customer service numbers.
5: Bad Credit History
Bad credit history is yet another disadvantage of some credit cards. You might find yourself denied a loan or a credit card.
6: Hidden Fees
Hidden fees are yet another disadvantage of some credit cards. These fees include things like late fees, over-limit fees, and more.
Restrictions are yet another disadvantage of many credit cards. Some cards limit how much you can spend each month.
8: Short Payment Terms
Short payment terms are yet another disadvantage of some credit cards. These terms mean you must pay off your balance within a short period.
9: Excessive Late Payments
Excessive late payments are yet another disadvantage of many credit cards. If you miss too many payments, you could lose your card.
10: Unstable Rates
Unstable rates are yet another disadvantage of several credit cards. They change frequently. This makes it difficult to budget.
11: Overdraft Protection
Overdraft protection is yet another disadvantage of several credit cards. It helps protect against unexpected overdraft charges.
12: Minimum Monthly Payments
Minimum monthly payments are yet another disadvantage of several credit cards. They require you to pay an amount every month even if you don’t have enough money to cover your expenses.