Economies and consumers are now turning to cashless payments because they are convenient. There’s no need to carry cash around at all times, and you can bring home the latest phone with just a single swipe.
Aside from the accessibility, many people are now gearing towards more rewards, purchase insurance, and other perks that a debit card can’t offer. However, since these credit limits are technically debts, you’ll have to make sure that you can pay the principal amount and the interest rates on top. This is often an agreement with the financiers that you need to honor. Knowing the benefits and the drawbacks of card payments can help you make a better decision and see if these are good for you.
Fortunately, there are a lot of offers in the market that can help you get more reasonable interest rates. You can visit kredittkortinfo.no/hvorfor-skaffe-kredittkort/ and calculate the costs and the maximum limit that the lenders are willing to give according to your specific credit score. Other advantages that they can give you are the following:
Buying luxury bags, traveling to other cities, and eating at five-star restaurants using your credit cards can generally give you a lot of points. These are the rewards that you can use to get a discount on your next transaction with partner merchants, and for every spending, there are cash backs that can apply to your account. Depending on the agreement that you have with your bank or private lending company, using your card for gas, utilities, and groceries can give you some rebates that you can’t find in cash.
More Convenient to Carry Around
MasterCard, Visa, American Express, and Discover are light and you can carry them in your pocket at anytime and anywhere. You wouldn’t have to withdraw huge wads of cash, and in the event of theft, you can simply call your provider and block the card. It’s going to be very useful, especially if you’re shopping for expensive items and when you’re going for a vacation. Merchants accept them, and they are welcome in many retail stores so you could get a drink or buy new clothes.
Secure your Finances
Canceling a transaction due to a defective item is now possible, and you can also request a refund if the contractors didn’t do a good job in your home renovation. It’s going to protect you from fraudulent and unauthorized transactions, and in some cases where a very huge amount is involved, you don’t lose your savings in an instant. Instead, other card issuers will investigate the matter, and you’re not going to be liable for the expenses incurred. Extended warranties can also bring about some peace of mind, so this should be one of your essentials.
Build your Credit Rating
Receiving a bill and paying it on time will mean that you can better build your credit history, which can benefit you in the future. Higher scores will mean that you’re never late, there were no issues of bankruptcies, and none of your loan accounts were sent to collections. Having a credit card at a young age can also help you manage your finances better. When you keep the utilization low, you can be eligible for more attractive offers in the future, and banks are going to send you multiple emails because they want to do business with you.
Keep a Record of your Transactions
Each of your purchases is going to be included in your statement at the end of the cycle. You’ll see exactly what you’ve spent on food, utilities, and others that you don’t need. Cut back on spending and manage your budget more effectively. It’s also going to be an advantage when you’re going to file your taxes because each item is specific, and the dates and prices are included in the list.
Why Should You Not Have One?
Accumulation of Loans
Too much debt can give you a lot of headaches every month, and this can lead to a never-ending cycle of paying and using your cards all over again. What’s worse is that if you can’t afford to pay the principal amount and only the minimum can be met, the interest rates are going to accumulate, and you’ll be left in a trap that can be difficult to get out of.
Interests that are Too High
Keep in mind that the annual percentage rates of your credit cards can change without prior notice. This is going to be dependent on the market, and if things aren’t looking great, you might suddenly see a soaring expense that you may not be able to afford. It’s very expensive to borrow money when you can’t pay in full, so think things through before swiping.
Can Lead to More Shopping
If this is your first time handling a credit card, it can be very tempting to go to the shopping malls and buy all the things that you can now “afford.” You can go home with your favorite food, shop for gifts before Christmas, and do other unnecessary things. This is going to hurt your future and financial situation, so you need to stay vigilant. Talk to a financial advisor when necessary so you can avoid bankruptcy, and see if you can stick to a safe budget each and every time you go out for errands.
Lots of Fees
Pay for annual maintenance and late payments when you have a credit card. The latter is not uncommon, but at some point, the lenders believe that you may face an emergency where you can’t meet the minimum due, and they are going to charge you with hefty penalties if this is the case. This is going to eat up the points and cash back that you’ve earned throughout the year, and they might not be beneficial for you.
Negative Impact on Your Credit Score
Credit ratings of individuals will determine the interest rate that they’ll get if they decide to take out a mortgage or an automobile loan, so they need to maintain it. While the right use of the cards is going to give you a few additional points, the reverse can also be destructive. It’s going to adversely impact your future when you don’t do things right.
Carrying Cash as An Alternative
Getting immediate access to funds will mean that you will not have to undergo different layers of underwriting as well as fill in a lot of paperwork. Pay for what you need in cash and make the transaction quick. You wouldn’t need to have interest rates every month, as well as a monthly bill. You can manage your finances better, and without the hassle of annual fees, you can get financially free faster.
However, carrying a lot of paper bills around can be risky because they are susceptible to loss and theft. You wouldn’t also find it practical to carry around a significant sum, and it can be challenging to keep track of what you’ve paid for. The choice of which one is going to be best for you will still depend on your lifestyle, habits, preferences, and needs, so make wiser decisions.