Owning a credit card can come with many benefits. Unfortunately, it has drawbacks as well. Understanding the advantages and disadvantages of owning a credit card can help you make an informed decision about whether or not to have one. If you do choose to own a credit card, managing your finances so you can pay off your card balances in full each month allows you to enjoy the advantages of owning a credit card without suffering any of the disadvantages.
Features
Credit cards come with liability protection against unauthorized charges, and most have other benefits ranging from rental car insurance to points for air travel and free hotel stays.
Paperwork
With a credit card you have an extra monthly bill to remember. Failure to pay the bill on time results in late charges. If you choose to pay your bill by writing a check, this also means adding another stamp and check to your monthly billing responsibilities.
Credit Score
Paying your credit card off monthly builds your credit score, which allows you to qualify for better interest rates for loans and mortgages. Neglecting to pay off your monthly balance causes you to accrue finance charges, and the resulting high balance can lower your credit score.
Ease of Use
Most businesses worldwide accept credit cards, so they are easy for you to use, especially when traveling. However, this feature can tempt you to splurge on impulse purchases that you may not be able to afford.
Fees
Credit cards come with different fees that you may need to pay. In addition to finance fees and late fees, your credit card may also come with annual fees, balance transfer fees, over-limit fees and cash advance fees.
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