Credit cards are as popular as ever and offer a number of advantages over cash and debit cards. However, they also present certain challenges when not used responsibly. Before opening multiple credit card accounts, consider these pros and cons.
Pros
Credit Cards Can Help Build Your Credit History
Credit cards are a great way to establish or improve your credit score, which is important for borrowing money for major purchases like a home or car.
If you use the card responsibly, pay off the balance every month, and avoid going over your limit, you will build a positive payment history on your credit report.
Credit Cards Can Be Convenient
Using a credit card is often a lot easier than carrying cash or using an ATM because you don’t have to worry about running out of money if you overspend or having insufficient funds if you run into unexpected expenses while traveling. If you use only part of the available credit line on your card, it will simply sit there until needed or until you pay it off in full each month.
You Can Earn Cashback Rewards
Many cards offer cash back rewards for spending at certain retailers or restaurants. You may also earn points or miles for every dollar spent with the card. Some rewards are paid out in the form of gift cards or checks mailed to you each month, while others are applied to your account balance as cash or points that can be redeemed for travel or merchandise.
Cons
Credit Cards Have High-Interest Rates
Credit card interest rates can be as high as 30 percent or more. If you don’t pay off your balance in full every month, it can become increasingly harder to repay your credit card debt.
You May Have to Pay Additional Fees or Penalties
Some credit cards charge annual fees for their basic accounts, which can range from $50 to several hundred dollars per year. Even worse is that some cards charge an annual fee even if you don’t carry a balance, which is especially problematic for people who don’t use their cards at all. Some cards also impose foreign transaction fees for purchases made outside of the U.S., which can add up quickly.
