Credit_card_-_Advantages_and_disadvantages

Document Sample
Credit_card_-_Advantages_and_disadvantages Powered By Docstoc
					Credit card - Advantages and disadvantages

Word Count:
659

Summary:
A credit card can be an asset to your lifestyle, but if not handled
carefully it can become a liability, especially if you find it so
convenient and easy to use that you lose control of your spending.

This short guide will help you understand how you can use your credit
card so it works to your advantage, not against you.


Keywords:
credit card


Article Body:
A credit card can be an asset to your lifestyle, but if not handled
carefully it can become a liability, especially if you find it so
convenient and easy to use that you lose control of your spending.

This short guide will help you understand how you can use your credit
card so it works to your advantage, not against you.

Advantages

A credit card can:

1.    Offer free use of funds, provided you always pay your balance in
full, on time.
2.             Be more convenient to carry than cash.
3.    Help you establish a good credit history.
4.    Provide a convenient payment method for purchases made on the
Internet and over the telephone.
5.    Give you incentives, such as reward points, that you can redeem.

Disadvantages

On the other hand, credit cards can:

1.    Cost much more than other forms of credit, such as a line of credit
or a personal loan, if you don’t pay on time.
2.    Damage your credit rating if your payments are late;
3.    Allow you to build up more debt than you can handle;
4.    Have complicated terms and conditions;

What is a credit card?

A credit card is more then a simple piece of plastic, it is first and
foremost a flexible payment tool accepted at 30 million locations
worldwide, and if the card balance is paid off every month, then no
interest is charged on purchases made so, essentially, short-term credit
is granted without the consumer paying any interest.

 Among its many features it provides:

1.    Access to unsecured credit (no collateral required against amounts
charged)
2.    Interest-free payment from time of purchase to the end of the
billing period
3.    Instant payment of purchases, allowing for instant receipt of goods
and services
4.    24/7 access
5.    Fraud protection

However before you decide to use your credit card, carefully consider all
of the factors and weigh them against your personal needs and values.

What about credit card control?

Handling money and credit cards wisely is a talent few of us are born
with. But it is a skill that can easily be learned. The place to start is
with budgeting.

What is a Budget?

It’s simply an organized way of managing your finances, basically, it
gives you an overall picture of where your money is coming from, when
it’s coming in and how it’s being spent. A budget should be flexible,
changing according to your circumstances.

Why Budget?

Budgeting helps us achieve short-term goals like paying the monthly bills
on time; it’s also for longer-term financial goals like buying a home, a
car, paying for an education,
a wedding or a holiday. When you take control of your financial affairs,
you’re more confident about the future.

A budget is key to financial control. It gives you a “Polaroid picture”
of where you stand financially and where you’re heading.

Credit card control tips

Use a low or no-fee credit card and save on the annual fee that some
companies charge.

Only charge to your credit cards what you can pay off in full when the
bill comes.

You might not use your credit card as much if you start believing that
you have to pay off your entire balance at the end of each month.
A good way to help to reduce what you pay on your credit card is to
search for a card with a lower interest rate. Many financial institutions
now offer at least one of these types of cards.

Remember that when you take a cash advance on your credit card, the
interest starts accumulating immediately and not on the due date of your
credit card bill.

Also keep in mind that if you make only the minimum monthly repayment you
may never get out of debt.


Conclusion

The main advantage of having a credit card is convenience but if you're
not good at budgeting and managing your finances, the over-use of credit
cards can leave you with a debt that's very difficult to pay back.

				
DOCUMENT INFO