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Drawbacks_Of_Not_Having_A_Credit_Card

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					Drawbacks Of Not Having A Credit Card

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1206

Summary:
There are very few things that are as ubiquitous as the credit card. This
little rectangle of plastic can give us so much convenience, but to the
unwary can also bring so much misery. Credit cards may be the easiest way
to get a standby line of revolving credit, always available when you need
it, but it can also be the fastest way to get mired in credit card debt.
People may complain about credit card debt but everyone agrees that
despite the risks, there are too many drawbac...


Keywords:
credit cards, business, finance, compare cards,


Article Body:
There are very few things that are as ubiquitous as the credit card. This
little rectangle of plastic can give us so much convenience, but to the
unwary can also bring so much misery. Credit cards may be the easiest way
to get a standby line of revolving credit, always available when you need
it, but it can also be the fastest way to get mired in credit card debt.
People may complain about credit card debt but everyone agrees that
despite the risks, there are too many drawbacks to not having a credit
card.

Credit cards as we know them today are relatively new and are
continuously evolving. The major laws protecting consumers’ rights
involving credit were passed in the mid-seventies. It may be timely that
Congress is currently considering added measures to enhance consumer
protection. Yet, for a long time, people were using credit cards as a
convenience product rather than as loans. Many people paid their entire
balance each month. Credit cards were not as essential then as they are
now.

Banks do not make money if people did not carry balances since a grace
period for purchases, where no interest is charged for one month, is
usually standard. As far as banks are concerned, the best credit card
customer is one who carries a balance each month after remitting the
minimum payment on time. Credit card issuers got really creative and have
managed to make credit cards a necessary part of daily living. They
worked to have credit cards accepted in more and more establishments, and
to have credit card holders understand the many benefits and conveniences
that they stood to gain from using their credit cards.

In our times, credit cards no longer a luxury. If you travel, you need
your credit card to book flight reservations and reserve hotel rooms. You
also need credit cards to rent cars, to purchase gas, and buy products by
telephone or online. Being without credit cards today would make your
life as difficult as traveling by horse and buggy. Without our even being
aware of it, credit cards have become a business standard.

A credit card is one of the quickest ways to build a credit history. When
you apply for a credit card and you still have no history, there are
credit card issuers that you can approach. These issuers specialize in
providing credit card products to customers who, because they are still
attempting to establish or expand their credit history, are generally
evaluated as higher credit risks. Many college students, for example,
fall into this category, along with those who have limited employment
income, or otherwise have poor credit history.

Today, having credit is a necessity. An inexpensive, reliable new car
costs thousands of dollars, and although most people may want to pay in
cash, the reality is they will need a loan. The rates and terms of that
loan will be determined by your credit history, which is easily
obtainable from the credit bureaus throughout the country. If you have
used credit wisely in the past and repaid previous loans on time, you
will be in a favorable position. If not, the result will be a more costly
loan with higher interest rates.

The use of the credit card as a source of loans is illustrated by the
fact that overall credit card debt now runs several hundred billions of
dollars. Credit card debt has risen quickly to unimaginable proportions,
and still banks continue to compete heavily for your business. Every
year, billions of credit card flyers with invitations to transfer to
another card issuer are sent out. The average American credit card holder
is now in possession of almost a dozen credit cards, with average debt of
$13,000. The credit card has indeed become a cornerstone of everyday
living. Other than its necessity in making flight and hotel reservations,
credit cards help the credit card holder with:

• “Cashless” transactions that avoid the risk of carrying around too much
cash
• An interest-free loan from the time of purchase until the payment is
due
• Cash advances from an ATM, in emergency cases
• The ability to shop by telephone or online
• The ability to purchase items when cash is not sufficient
• The ability to withhold payment when dissatisfied with a purchase or to
dispute erroneous billings
• An instant source of credit that is available without filling out forms
or undergoing further credit checks.

Cash, when it gets lost, is irretrievable; unlike cash, if you lose your
credit card you can get a replacement no matter where you are. You also
get protection against fraud or unauthorized use, which means you have
minimal or even zero liability. Credit cards can be a resource in case of
emergencies, such as a large car repair bill or an unforeseen expense.

Credit card companies normally provide the card holders with copies of
their monthly statements. These statements list down in detail all
charges that have been made against your credit card account. The monthly
statements can thus serve as a complete financial record which, to the
prudent credit card user, can become a guide for budgeting and
controlling expenses. If the card user is a student, the monthly
statements can become a tool for learning financial responsibility.
Indeed, for personal finances and small businesses, credit cards have
become a necessary financial tool.

There is also the prospect of being able to save money on future
transactions because the usual credit card offers a number of rewards
privileges that include frequent flyer miles, cash rebates, discounts or
free telephone calls, points that go towards reduction of the cost of
airplane tickets and hotel stays, points that can be redeemed as consumer
products or gift certificates. All of the major credit cards — Visa,
MasterCard, American Express — offer a multitude of card products with
endless permutations on rewards, benefits and privileges that you can
enjoy to maximize the value you get from your credit cards.

Ownership of a credit card entails certain responsibilities on your part.
If these responsibilities are not exercised dutifully, you could
unwittingly put yourself in a difficult situation where you lose your
credit card privileges and suffer the drawbacks of not having credit
cards. Your primary responsibilities as a credit card holder include the
obligation to pay your bills on time, to stay within your pre-set
spending limit, and to maintain the worthiness of your credit.

The convenience of having credit cards may tempt you to live beyond your
means. You need to remember that excessive credit card debt and late
payments will impair your credit rating and make it more difficult and
costly to obtain credit in the future. Remember it is very easy to lower
your credit ratings, but painfully slow to raise it.

It is now more important than ever to be effective at managing credit
card debt. This is particularly true for people living from paycheck-to-
paycheck and who must dip into their credit sources to make ends meet. If
you are able to plan your credit spending and payments to your account,
you will be rewarded with higher lines of credit and better rates.
Otherwise, if you’re not efficient and disciplined with your credit card,
you’ll have very few options available.