We cannot deny the advantages that come with using credit cards. From saving you in emergencies to being convenient, especially if you are traveling to distant countries, the perks are enormous. However, they are not without their shortcomings. Further, some people have entirely cut off using plastic payment because of the risks associated with them.
As the saying goes, there are two sides to every story. Likewise, credit cards have pros and, of course, cons; the latter is what we are going to talk about in this post. Most card issuers will convince you to take their card, but very few will tell you about the issues associated with them. That is why many first-time card users fail miserably at using these cards and end up with mass amounts of debt.
If you are not sure whether to sign up for a particular credit card or not, here are some disadvantages you might want to consider first. Remember, not every credit card offer will be right for you. As such, always do your due diligence and be mindful of the risks associated with them.
Risk Of Debt
Using a credit card is like taking out a loan that you will need to pay back later. The issue comes when you are unable to pay it back and you begin earning interest on your purchases. Most card issuers impose an interest rate, which can build up so quickly at rates upwards of 20%. If you don’t pay your balances in full and on time, you will be subject to these charges.
Fees And Charges
As mentioned above, credit cards come with high-interest rates if you don’t pay back your debt on time. You might also incur charges for transactions overseas. Such fees can be as high as 3% of every purchase you make. Further, you may also get fees for going over your credit limit or making a late payment. As such, be careful how you use your cards and always read the fine print carefully.
Credit Card Management Troubles
You will find that some cardholders are tired of using particular cards for various reasons. These people, in most cases, incur hefty fines in late fees and incur other penalties that they feel are quite unfair. Some individuals find it exhausting to keep track of these cards and to pay for each one of them. Some other clients have complained of negative experiences with customer service, which is not a pleasant experience for any card user.
Studies have shown that paying for purchases using credit cards makes people spend more as opposed to when they paid with cash. You will find that, in most cases, if you use a credit card to pay, you will most likely not budget as well. Therefore, using cash instead of credit cards helps people stay on a budget and keep a keen eye on their expenses.
When using credit cards, there is also an increased risk of identity theft, especially for individuals who use their cards to make purchases online. As such, always be careful when giving you payment information to unknown and unsecured sites. If your credit card information is stolen, you should report it to your card issuer immediately.
Because of these issues, some people have decided to do away with credit cards altogether. Others have decided to reduce the rate at which they use these cards. Whatever decision you make, you must weigh the risks versus the benefits before making your final decision.
Note: There are risks involved when applying for and using a credit card. Consult the bank’s terms and conditions page for more information.