Pros and Cons of Carrying Credit Cards: Opening/Closing Accounts

Credit cards are often seen as a problem of today's society. With the high amount of debt in the United States, it is hard to argue with this statement. With nearly three years of experience in credit card collections and over four years as a bank teller, I have had a lot of experience with many different cards and have owned many credit cards myself. Despite the overwhelming financial advice that trends against opening a credit card account, their are benefits to gain from having credit cards. The following are pros and cons to having credit card accounts.

Pros:
- Special Offers: Although we are currently going through a credit crunch era and rising fees, there are special offers worth taking advantage of. If you are a responsible cardholder, look into cashback cards with no fees. Many of these program are going away, but if you pay off your credit card each month, they can be worth the trouble financially. Note: Special offers to stay away from would include t-shirts at a sporting event. These cards usually come with a high interest rate and even annual fees.

- Build Credit: There are plenty of ways to build up credit, but credit cards are often the easiest way to start. Always read the disclosures before signing up for a card and keep your balance low if not at 0 to avoid racking up debt. Also keep a cushion of funds available on the card. Companies often calculate the amount of credit you have available to you already and what is already used on credit cards you currently own.

- Leverage: Using credit cards for profit is a dangerous game, but there are people out their who play this game successfully. There are many ways to use credit cards for leverage, but many of these are very complicated and risky. For more information check out this article on " Using Credit Cards to Make More Money ."

- Fraud Protection: Credit cards have great fraud protection in most cases. When needing to pay for something over the internet or in a foreign country.

- Exchange Rates: While traveling abroad, your credit card may provide you with the best currency exchange rate on purchases. I would almost always suggest using credit cards for overseas purchases even over traveler's checks and cash.


Cons:
- Fees: Due to current restrictions on how banks can collect fees and limits on interest, banks are increasing general credit cards fees to ensure revenues. Liz Pulliam Weston states; " Average fees for late payments, over-limit purchases and other infractions have nearly doubled in the last decade as issuers relied increasingly on fee income for their profits, and that trend isn't about to abate ." Due to this, credit cards are more expensive than ever.

- Variable APR: Credit cards often have variable interest rates, which include a fixed amount added to the current prime rate. The current Wall Street prime rate is 3.25%. This rate is usually added to a rate determined by the financial institution, this can be around 10% or more. The current average rate for consumer credit cards is around 16%.

- Customer Service: Contacting customer service on a credit card account can be a frustrating experience. While working in collections for nearly three years, I constantly heard of complaints and had to continue to transfer upset customers trying to accomplish very simple tasks on their credit card accounts. No customer service group is happy to cancel an existing account, but credit card customer service representatives can earn direct incentives from preventing you from closing your accounts, understand that their primary goal is not to help you, but to help the company.

- Department Store Credit Cards: Customer cards are a bigger rip-off than regular credit cards for many reasons. Store cards not only have a higher rate, their reward systems and sometimes promotional percentages off of clothing are made to help you spend more money at their store. Higher end stores have 0% cards, which influence higher spending on clothing you could find cheaper elsewhere. Stay away from any store cards no matter what they are offering as a reward.

- Temptation: Possibly my biggest vice, the temptation to just put it on a credit card instead of using a debit card or cash can hurt you in the long run. If you cannot pay for it in cash, you probably shouldn't buy it.