Swiper, no swiping or yes to swiping?
My wife usually loves to go on shopping mall and swipe our credit cards to pay the bill. Even when eating outside, she uses credit cards to pay for our meal. How convenient but sometimes it can wreck your finances.
Yes. Credit cards can wreck your finances because they can put you in debt. But there are still reasons why you need to have one.
I knew that some people have fear on credit cards. Why?
1. In 2020, credit card debt has reached an average of 1 trillion dollars.
2. Based on worldometers.info, this 1 trillion debt is almost the gross domestic product of each country who falls below the top 15 country.
3. The average debt of individual American family is 2700 dollars
4. An individual family pays around 14 percent apr on that debt
So these are the reason why credit card can wreck your finances. BUT.. there are still numbers of benefits a credit card can give if you use it wisely.
1. As long as you pay your credit card on time, the 14 percent apr will not be an issue depending of the credit card you have. It as simple as pay on time and you don’t get the interest charge
2. Starting to build credit early helps you out of better credit score. You will have the lowest interest rate when you buy a house or a car.
3. Cash backs – it will depend on the credit card you have and the policies of the credit company. Some companies will give you minus points and other will give you a fixed certain amount on all your purchases.
4. Zero fraud liability – unlike with printed money, if someone steal your credit card and as long you report it in a timely manner, you will not be liable for fraudulent purchases. Again, this depends on the policy of your credit company.
5. Extended warranties and purchase protection – if you buy something on your credit card and it has a manufacturer’s warranty, it will add an additional one on top of that or if you buy a purchase and within a certain amount of days, something happened to it like it was stolen, you can receive protection from that purchase
6. Insurance – when you buy something using your credit cards like a car and it gets wreck or you got hurt because of it, you will receive compensation from it as long as something you buy with credit cards cause you any harm.
Final words
There are lot of risk of credit cards and lots of benefits. You can compare it to a fire, it can keep you warm but can burn you down too. The best strategy of having a credit card is to use it and control it wisely. Never let your credit card controls you.
Only get a credit card if you knew you can pay off or you only buy what you can pay off. And always review your credit cards policy, not all benefits above mentioned are the same. It will always depend on your credit company.
Happy swiping!
Sources
https://www.valuepenguin.com/average-credit-card-debt#:~:text=Our%20researchers%20found%20the%20median,almost%20506%20million%20card%20accounts.
https://www.worldometers.info/gdp/gdp-by-country/
https://www.investopedia.com/credit-card-debt-continues-its-plunge-during-the-pandemic-5095237