Double Edged Plastic: The Pros and Cons of Credit Cards

Today, credit cards are almost a necessity. Like cellphones, most people have at least one (even if they have not-so-great-credit). It not only provides convenience, but can be a financial life-saver in desperate times. Having a credit card nowadays is also one of the most important steps a young person can take in building their credit and financial future. Excellent credit card offers are often extended to students with new credit in a sort of act of faith by credit card companies (and as a way to sell you some stuff and make money, of course).

But even a good credit card may not be all it's cracked up to be further down the road. Furthermore, much of your credit card experience actually depends on what you do as opposed to what your provider does. The following are some pros and cons in regards to living in the borrow-age.

PRO: Credit cards will build your credit score. The more you spend on your credit card, the more credit cards want to give you- provided, of course, that your payments are ALWAYS on time and you have a spotless record. The idea is that the more you spend, the more you'll have to pay them back in interest, and accordingly, the more they'll want to give you to spend in the future. Besides which, the higher your credit score climbs, the more opportunities you'll have in other credit-related fields (house loans, car loans, etc.).

CON: The more you spend, the more interest you accrue. Also, the higher your debt, the higher each monthly payment. So if you spend $1,000 extra on a credit card in a month's time, you could go from a minimum monthly payment of $20 to $50 depending on your total balance and card plan. Watch out.

PRO: Convenience! If you forgot to grab some cash on the way out, your credit card can you rescue you in such situations. Credit cards are also meant to be "buy now, pay later". If you need to make a large business purchase or personal investment, you do not have to wait and save up your cash.

CON: Some places do not accept plastic- only cash. Some examples are food kiosks, pizza delivery men and bus drivers. Also, many stores nowadays require a certain minimum to be spent (usually $10) if you're going to be using plastic. This is because it costs establishments a small amount of money each time they use a credit or debit card (as a payment to the card providers). Smaller establishments lose a lot of money by processing $2.00 on someone's card. Be aware of these conditions ahead of time.

PRO: Buying things online. Duh. Today, a large number of people do all their shopping online- from music to electronics to clothes- even groceries. Using a debit card is also acceptable, but a credit card allows for more security, as well as saving your actual bank account for other things that cannot be paid with a credit card (bills, loans, etc.).

CON: Identity theft. Always make sure the website you're buying from is a well-known place like Amazon or similar. If it is not, do extensive research on the internet before buying from the site. Finally, beware of phishers and fake websites. Always double check your browser's address bar before entering sensitive information. Make sure the website is the ACTUAL website (and not a dummy website that looks like it, such as "ammazon.com") and that the connection is SECURE. Most credit cards are very good at catching identity theft, but be sure to report any suspicious activity on your account IMMEDIATELY.

PRO: In can get you out of a financial emergency. You can use credit cards to pay many bills, buy groceries, or whatever NEEDS to be done. If you're having a tough month and are in a tight spot, your credit card can help alleviate the pressure and get you through. Furthermore, many credit cards offer cash loans to their customers in good-standing.

CON: Things can get out of hand. By relying on your credit card too much, you could wind up digging yourself into even deeper debt. If you plan on using a credit card in an emergency- make sure it's an actual emergency. Having no food in the house is an emergency. Paying the electric bill before it gets shut off is an emergency. Buying tickets to your favorite band's one-night only concert is NOT an emergency.

NEXT PAGE: SOME FINAL TIPS

-When first starting out with a credit card, plan to put a few hundred dollars of expenses on it. DO NOT pay it all back once- pay it off in reasonable amounts, always more than the minimum payment. So, for example, if the minimum payment is $20 a month, plan on paying at least $30 , but no more than $50. You'll want to prove to credit card companies that you can you be responsible over long payment plan periods (and of course, they make more money on interest this way). The upside is that this will help your credit score.

-If you miss a minimum payment due to forgetting or some sort of discrepancy (always triple check those bank account numbers when entering!), your APR (interest rate) and monthly payments will skyrocket. Don't panic. In most instances, if this is your first offense or a rare occurrence, call the credit card company and explain the situation. Tell them you would like to speak to a manager.
When speaking to the manager, be extremely polite and explain that you value their card services, have always paid on time, and you apologize for the error. If that doesn't work, remain polite and tell them you simply cannot deal with the new APR and that you will have to cancel your card. At the very least, they should cut a compromise with you. In most cases, they will revert your APR and monthly payments back to the original terms. DO NOT make a habit of this.

-Take advantage of grace periods when first getting a credit card. Often, a good card will offer a 6 month period of 0% APR. This often means everything you buy during the first 6 months will not accrue interest and simply need to be paid back with the exact amount spent. Take advantage of this period and put any big investments or purchases on the card during this time.

-Finally, read the fine print! Seriously! Read every in and out and do research online if you do not understand something. Good credit cards should not have any annual or hidden fees. Beware of credit cards that frequently change their rates and terms of service.

A credit card is something everyone should have, but it is indeed a double-edged sword. It provides security and convenience, along with a slew of other perks. The key is to do your research and plan out spending and payments ahead of time.