Wednesday, December 28, 2011, AM | Leave Comment
There are definite advantages as well as disadvantages of charging everything to your credit card. If you have developed discipline over the years to pay off your credit card bills in full before the due date every month, then you can keep using credit cards safely and soundly.
Otherwise, the disadvantages take over and you will lose a huge amount in interest charges not to mention recurring nightmares about your credit card debt.
The following are some of the advantages of using plastic as long as you are disciplined.
Credit cards let you use the card company’s money for free. As long you pay your bill in full each time it’s due, you don’t have to make interest payments on things you buy for anywhere from 15 to as many as 30 days after you buy them.
Credit cards make budgeting brainless. If you put everything on them, you have a record of your spending, which can help you make and trim your personal budget.
Many credit cards give away cash refunds, free trips or other rewards based on how much you spend.
If you are not careful, using credit cards can have a devastating effect on your financial life.
Credit card can easily bankrupt you, or at least create massive debt that follows you for years.
Card companies make money by lending money to you, then charging interest if you take time to pay them back. Don’t let them swell their bellies on your account.
How to turn disadvantages into advantages
There are ways to turn disadvantages into advantages.
Set up a bill-paying system that reminds to pay your card on time. You will avoid late fees and the temptation to carry a balance at a high interest rate.
Before making big purchases, check your credit limit. It’s possible that your card issuer has changed it since you last looked. So you will avoid paying hefty extra charges.
Before shopping for a credit card, decide whether you will carry a balance or pay off your charges every month. If you never carry a balance, consider a rewards card. If you carry a balance, try instead to get a lower interest rate.
In a Nutshell
Try to avoid the disadvantages of charging everything to your credit card. Instead use your credit card to your own advantage instead of helping the credit issuers fill up their bellies.