Financial education: The pros and cons of a credit card

When I first got my credit card, I vowed I would never use it unless I absolutely had to. Let’s take a moment to laugh at my naiveté. Let’s be honest, a credit card is like having a license. It allows you to drive, and even when you know the speed limit, sometimes you tend to go over. We’ve all heard the horror stories; people who shopped themselves into insurmountable debt, and the eventual financial ruins that comes with debt.

Of course, we don’t believe in telling people how to spend their money. But we’re convinced that a little sensitisation goes a long way! With a bit of know-how, anyone can use a credit card in a practical, non-destructive way. Here are our identified pros and cons to shopping with a credit card:

The Pros

Emergency protection: Emergency fund is just that: money used for emergencies! A credit card can help you juggle unforeseen expenses when your account has been depleted. Or prevent it from getting there!

 Purchasing power: Online, in-store, overseas, at your local market, your credit card gives you purchasing power worldwide! It is especially handy when you’re overseas and do not have cash on hand.

Buy now, pay later: Credit cards let you buy now and pay later. If you are making large purchases on your debit card, once that money is gone, it’s gone. Buying now and paying later is a great way to keeping your account intact. And with a credit card, you also have the option of gradual repayment, so you’re not out of pocket.

 The Cons

 Interest:  A credit card’s interest rate is the price you pay for borrowing money. A high interest rate can drag you deeper and deeper in debt if you don’t pay off your balance quickly. You can avoid paying (high) interest on purchases if you pay your balance in full each month by the due date.

Ease of spending: You may be thinking that this should be up in the pros section, but having a credit card make it a little too easy to spend money. If you’re anything like me, it’s easy to pretend like you’re not spending real money when you’re not paying with cash. If you’re not careful, it’s easy to fall into suffocating debt. It all comes down to being careful with your money.

Destroy credit: What the credit card giveth, it can taketh away. Missing payments, going over your credit limit, or having too many credit cards can quickly put you in financial debt!

For some people, credit cards can be destructive. So long as you can use cards wisely, it is a very handy tool to have on hand, especially as you don’t know when you will need it the most.

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