Pros and Cons of Shopping With a Credit Card

News About Credit cards In India

Credit cards offer convenience, rewards and protections. But use them responsibly and avoid overspending.

Credit cards are tools. Like most tools, they can be incredibly helpful when used properly but dangerous when used incorrectly.

Putting purchases on credit cards rather than using cash comes with a raft of benefits, from earning rewards to gaining valuable consumer protections. The most common pitfalls of credit card use — overspending and interest charges — can be avoided with responsible use, but they're still worth being careful of.

Here are some of the biggest pros and cons of shopping with a credit card.

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Pros

Convenience. Credit cards give you purchasing power worldwide — locally and overseas, in stores, online and by phone. Many credit cards (especially Visa and Mastercard cards) are accepted virtually anywhere. You don't need to carry wads of cash.

Rewards. Rewards credit cards give you cash back, points or miles for each dollar you spend. Many of them offer bonus rewards in specific categories, such as supermarkets, gas stations and restaurants.

Financing large purchases. Credit cards let you buy something now and pay for it over time. We'll discuss the dangers of this later, but don't overlook the advantages of using credit.

Building credit. Credit cards can be invaluable for strengthening your credit. By making frequent purchases and keeping current with your payments, you can build a positive credit history, which will be reflected in your credit scores.

Emergency purchasing power. Ideally, you should have an emergency fund with enough money to cover three to six months' worth of expenses to keep you afloat in case of a layoff, medical emergency or other unexpected event.

Protection. Credit cards have better protections against fraud than debit and ATM cards. With a credit card, you'll pay no more than $50 in the event of fraudulent transactions — and many issuers pledge that you'll have no liability whatsoever.

Cons

Interest charges. Perhaps the most obvious drawback of using a credit card is paying interest. Credit cards tend to charge high interest rates, which can drag you deeper and deeper in debt if you're not careful.

Temptation to overspend. Credit cards make it easy to spend money — maybe too easy for some people. When you're not laying out cash upfront, you can get detached from your spending.

Late fees. Fail to pay your bill by the due date, and you'll probably get hit with a late fee, which can approach $40. This adds up quick for repeat offenders.