Credit cards, good or bad? That can all depend on with whom you speak. Some people don’t trust themselves to own one, while others couldn’t live without them. There are definitely good points and bad points to consider. Let’s take a look at both sides.
Not that many people actually use cash or checks in today’s paperless society, but presenting a credit card at checkout eliminates the need to stop by the ATM or scribble out a check on the most convenient flat surface. Even if you usually use a debit card, you may have a spending limit for a given period, which could cause some inconvenience when you need to make a purchase beyond that particular budget limit. Then there are those who don’t keep close track of their checking balance (tsk, tsk), in which case using their credit card would help them avoid incurring fees for insufficient funds if they accidentally overdraw their account.
If you use your credit card regularly for everyday spending, check out your credit card statement, where your purchases are listed in black and white. You’ll get a nice listing of your spending habits for the month. So if Groupon enticed you to purchase more deals than you really needed, your statement won’t be an accessory to your crime, it’ll call you out quite nicely in both frequency and dollar amount. The cold, hard, itemized facts could help you identify and reduce budget busters.
When you use a credit card responsibly, it smiles down upon your credit score. Spending and paying in a responsible manner can help improve your credit score, which in turn can provide you with things like better interest rates on loans and insurance. But beware, using that same card in a reckless manner (late payments, creating balances too close to your credit limit, etc.) can lower your score or even have you denied for credit.
What happens if you lose cash while you’re out? Many times it’s finders keepers, while you play the role of “losers weepers.” If you misplace your credit card, or someone steals it, a simple call to the issuer of your card shuts it down with minimal responsibility on you for any purchases that may have been made fraudulently. Many credit card companies will also go to bat for you on a bad purchase.
What do many people do when planning a vacation? If you’re heading out of town, you may be reserving a hotel room and/or booking a rental car. One of the first things many reservation desks will ask for is your credit card number. This protects the company in case of cancellations and/or damages. Can you make reservations without a card? Depending on the company, maybe so, but the whole reservation process is much smoother with a credit card account at the ready. (Also, don’t forget to let your card issuer know of your travel plans so your card isn’t accidentally blocked as being used fraudulently when purchases happen outside your normal spending patterns.)
Today, many credit cards offer the option of rewards of some sort. For every predetermined amount you spend using your card, you earn credit that can be redeemed for a reward, which can be cash back, airline miles, points toward merchandise, etc. This shouldn’t encourage you to spend simply to earn your points, but if you need to spend the money for something anyway, why not earn a reward? Check out Vantage Credit Union’s CURewards program.
An open line of credit can eat away at the temptation to buy something you don’t need or can’t afford. Having a credit card makes it very easy to overspend. A simple rule to follow is, if you can’t pay off the balance at the end of the month, don’t put the purchase(s) on your card.
Interest & Fees
When you pay your balances in full each month, that zero balance doesn’t accrue interest. If you let your balance increase month after month, only paying the minimum amount required, the interest will eat away at your hard-earned money. If you throw in a late payment or two, now you’re talking fees on top of the interest. Do your best to pay your balances in full and on time.
When you’re late with a payment, not only will you be charged a late fee in most cases and end up with a higher interest rate on your balance, it will affect your credit report negatively. Do it enough times and you’ll find you don’t qualify for better rates when taking out a loan or shopping insurance, if you qualify at all. And don’t forget landlords and employers may also look at your credit report as part of their decision-making.
Unfortunately, identity theft is a very real threat to everyone. When you have a credit card, you could lose it or have it stolen with the thieves racking up purchases before you know it’s gone. Your liability may be limited on these losses, but it’s still a headache to deal with the repercussions. Or, someone could steal your personal information and open a whole new card in your name, spending thousands of dollars you’re not aware of until you get the bill. It’s important to always check your statements for any activity that appears suspicious and report it immediately.
As with many things in life, credit cards have their good sides and their not-so-good sides. It’s your job as a credit card holder to remain vigilant to the dangers as you enjoy the benefits.
Do you own a credit card from the credit union you know and trust?
Vantage Credit Union made the Dean’s List of credit card programs that have earned 5 stars and the Credit Card Connection Seal of Approval for our fair and ethical practices. Check out our World and Platinum card options.