You’ve probably heard of credit cards before. It is one of those plastic cards that contain a chip, which you can use by tapping into payment systems. They are as ubiquitous as owning a wallet nowadays, and they have genuine use cases to them that you could take advantage of as an individual consumer. However, you could also fall into the trap of going into debt, cycling through different credit cards, and impulsively buying everything to your heart’s desire. There is also the upside by which you could take advantage of credit cards, such as utilizing Chase Ink, for example.
There are also many different types of credit cards, and you could easily get lost in them. Which one should you choose? Should you get many types of credit cards? Are credit cards even beneficial in the first place? How do you use credit cards wisely? These are some of the questions that this article will try to answer, so read through them and gain a nugget of financial wisdom!
How do credit cards work?
Credit cards give you access to a certain amount of money. It also operates by opening a bank account and registering your name with the financial institution. You get to borrow a certain amount of money and use credit cards to pay for things. You’re essentially borrowing money this way, as you don’t need to have a specific amount of balance in a certain bank in order to spend using credit cards. Credit cards are usually utilized in day-to-day expenses such as buying groceries, paying for gas, and buying different things at the mall. Because of that, there is a sort of dual-edged sword to credit cards. Let’s talk about the pros and cons of one and see for yourself how to maximize them.
Pros of credit cards
There are a lot of benefits to using a credit card. One of the main reasons why they are so popular in the first place is that they are very convenient. Because you could easily tap and pay for anything that you’d want to buy or input your credit card details, there is a level of convenience to them that traditional cash couldn’t achieve. Another benefit is that you could buy things that are very costly in amount and pay them in a periodically given timeframe. For example, buying a washing machine upfront might not fit in your budget, nor does it make for a financially sound decision. You could use credit cards to set up payment installments and own the washing machine that way.
Another direct result of such a system is that credit cards are good ways to build your credit score. Your credit score dictates a lot of things for you in your life: the amount of loans you can take, the mortgage you can acquire for a house, and even how much discount you can get when buying something of a very large value. Paying your dues on credit cards will give you a higher credit score, so diligently doing so will help you in the long run. Just make sure to pay your dues on or before the due date so that your credit score will improve.
Cons of credit cards
Of course, with the level of convenience and ease of access to money comes a big responsibility. If you’re not careful with your financial and purchasing decisions, it’s very easy to dig yourself a hole and get buried in debt. Since credit cards are easy to access and get, you could very easily fall into the trap of impulse buying all the time. This can be easily circumvented by thinking about your income and making wise decisions before even getting a credit card. You have to understand first why you’re getting a credit card and only get one that you could pay off at the right time. Falling into debt continuously with credit cards would only lead you to a worse position long term.