Are Credit Cards Angels or Demons?

Credit card is the necessary evil of modern day existence. It is difficult to live without one. It is difficult to live with one without worries. You have to use it very cautiously. You have to be always on your guard. The moment you let this serpent ensnare you with its caprices, you are doomed. Exploit its advantages and never let it exploit you. Remember, the innocent piece of plastic that you are carrying in your wallet is actually very dangerous.

Let's first see why the credit card has become so important in our life.

The 5 pros of credit cards:

1) Convenience

Credit cards are so much more convenient to use than cash. You don't have to count the cash or plan ahead regarding how much money you may need. A thin little piece of plastic in your wallet has taken away all these worries. This convenience is more felt while travelling. Credit cards are accepted almost everywhere in the world. So you don't have to worry about currency conversion while abroad.

2) Safety

Credit cards are safer than cash. If you lose a card, it is replaced. If you lose money, it is gone. It is particularly difficult to carry a lot of cash. A lot of cash draws more unwanted attention and the person carrying such an amount always feels a little uncomfortable.

3) Credit History

Credit card helps to build your credit history. A good credit history is necessary if you are going to take a loan for buying a car or a house. If you never cross the limit of your credit cards and always pay your credit card bills in time, you can build a really good credit score which may later save you a lot of money when you make the significant purchases of your life, like a house or a costly car.

4) Online Shopping

In our cyber age when we spend a significant amount of our time on the net, online shopping has become an everyday affair. Without a credit card you can't buy from most internet sites. Often we get better prices if we something online and thus we can save money just using our credit card no.

5) Emergency help

A credit card is of much help in the time of an emergency. We always need money but we can't always carry money. But a credit card allows us to pay when we don't have access to cash. Particularly, while travelling if there is any sudden change of circumstances and we have to extend our stay or spend a night in a place outside of our plan, we always have our credit card to pay.

Let us now examine the evils of this nice and helpful piece of plastic.

The 5 Cons of credit card:

1) Emotional distance

Credit cards create an emotional distance from actual money. Handing over a lot of cash is always more difficult than swapping your plastic. We become emotionally detached from our money leading to an increase in our tendency to spend.

2) Excessive spending

Credit cards give us more buying power and its normal result is that we spend more than we would without it. We never have to postpone a purchase because of lack of cash. We can spend on impulse. We tend to feel that it is the blessing of credit cards. But it is the actual curse. This tempts us to spend more than what is there in our account and draws us into the vicious cycle of debt and interest and more debt.

3) Interest

Credit cards are good as long as you pay the whole amount due by the end of the month. But if you fail once, you fall in their trap of ever increasing interest and end up paying much more than the actual price.

4) Hidden costs

Many credit cards have a monthly or annual fee which makes them quite costly to own. We are not always aware of these when we accept the card being impressed by the benefits they promise. Minimum payment is another trap. If you go on paying the minimum payment, the balance just go on increasing and you end up paying a lot more than you thought.

5) Bad credit history

It is very difficult to build a good credit history and very easy to lose it. A little deviation from the regular payment circle of credit cards may result in a bad credit history which may become difficult to correct. Due to illness or a long tour, you may sometimes unwillingly fail to pay the credit card dues in exact time. But even if you pay them when you realize the default, it will take time to rebuild the credit history.

If used very carefully, credit cards can be very helpful. But if you fall into its obvious temptations, it has the power to ruin you.