There are a variety of opinions about whether or not it is favorable to have (and use) a credit card – thus making it a subject of debate. Some people swear them off altogether and pay cash. Others cannot live without their plastic. So, given the level of interest in the subject, I’ve decided to make a mini-list of pro’s and con’s of credit cards.
As always, feel free to add to the list.
Pro’s of Credit Cards
Con’s of Credit Cards
You can also argue along the same lines that debt, in general, is subject to the same characteristics. Seeking credit and maintaining credit can be a vicious cycle – so some people choose to avoid it altogether. Despite our “debtor” society, there are still people out there that diligently save money and pay for their large purchases in full, rather than seeking credit. Unfortunately, very few people have the patience to do so and choose to get into a lot of debt in order to have the things that they want (like the fancy cars and a McMansion for a first home).
For each point that I’ve made, someone else will think of a counter-point. So naturally, I expect a reaction.
But that is precisely what needs to happen – people have to think about what they are getting themselves into before they sign on the dotted line – whether it is for a credit card or for some other form of debt, like a loan. People also need to realize that credit cards do not solve any of their problems, like a lack of cash. Everyone has to consider the pro’s and con’s of using debt in addition to their needs and the contract terms in order to make an educated financial decision. So keep this short list in mind next time you think about using plastic or paying in cash. It may make you think twice.
~K
If you would like to make a comment, please fill out the form below.
Great Post. I agree with you that most people get and use credit cards so they can hide the fact they do not have the funds to pay it off. Or they think that debt is a way a life. Credit cards are not bad, for the user who understands and uses them within their budget they are very handy and a good way to track expenses. Its the people who think credit cards are free money to send that need to worry
You must remember that it is not credit cards that are the problem, it is their incorrect usage. Credit cards are a fact of life these days, and it is almost impossible to survive without them. They are needed to hire a car, book a hotel room, book airline tickets, build a credit rating, all manner of things; and they do make life much easier for many people who understand how to handle their money properly. It bothers me when people moan about their credit card debt for all the reasons you have listed in the ‘cons’ list - the real problem is people not taking responsibility for their own finances.
I agree with Brian with that credit cards are fine as long as the person using them is aware and responsible. They are needed for many aspects of our life and can help in the long run. A lot of times if not holding cash around, I prefer to use my debit card because with online banking I can visualize exactly what is being deducted from my account. It helps me mentally see how much I am spending and how I should adjust my budget.
Craig
http://www.budgetpulse.com
Ahhh… the convenience of credit cards. I seem to waver back and forth on the line about using cash or credit. Credit cards are a fact of life when you spend a lot of money (be it for personal use or business) and get tired of going to the ATM every day or two. It’s so much easier to spend more that way, though, and I find even when I do have cash it feels easier to spend $60 to pickup dinner for all your friends on a credit card than emptying my wallet of most of it’s cash.
I think it’s time I move back to using cash more than my credit card again.
Good article, especially for someone who hasn’t thought this through very much. I love your site (even if I’m a bit past my 20’s.)