When you are in a financial pickle, the equation above seems like an easy one to answer. Yes, of course a credit card equals doom and gloom! After all, the side-effects are the reasons you are in a sticky spot money wise. There is no doubt that high-interest rates and an overdue balance are bad on budgets. Indeed, they can destroy the best of financial plans in a matter of days.
Still, the negatives don’t mean that a credit card isn’t a potential ally. It depends on whether the pros outweigh the cons, and if you are mature enough to make it work. If you are, below are more reasons why a credit card isn’t trouble.
It is rare to find a card company that doesn’t have a promotion for new and existing customers. A typical example is 0% interest on purchases or balance transfers. Some companies even offer both in conjunction. Plus, they have purchase promotions, such as cashback and reward points. How are these benefits? Let’s start with the 0% interest. The savvy will know that the rate jumps at the end of the deal. However, the length of the promotion tends to last for one to two years. Therefore, you get a significant chunk of money and up to twelve months to come up with a solution. If you can pay the balance off every month, the cash back system kicks in and pays you to play. Usually, the reward points are eligible for flights or hotels and even groceries.
The goodies also make a credit card a quick and easy source of finance. How many times do you need to make an essential purchase but have to wait until payday? It happens often and can take a big chunk out of your finances. With a card, there is no reason to wait because it may entail so-called fast cash loans and advances. As long as there is 0% interest, you can buy it now and think about the repayment later. Even if the rate bumps up, it shouldn’t be a problem as long as you pay it off in full each month. A piece of plastic is an excellent way to supplement your income and stagger required payments. All you have to do is put aside enough money when you get paid to cover the costs.
You are secure as long as you pay cash right? After all, there is no way for someone to hack a purse or wallet. The truth is that cash might be safer from a physical standpoint, yet it doesn’t offer protection after the fact. Once you buy a product with cash, you only have the standard return policy to get your money back. A credit card is different because it has extra security measures. Simply put, if the product or service is faulty, you will get a refund. The same goes for if the company declares bankruptcy, too. Oh, and if you are worried about credit card fraud, the majority of corporations refund the difference. Plus, there is the option of insurance for extra security.
The Credit Score
A credit card is the first step in a long journey of lending. When you need a significant sum, a bank loan is the only option because of the amounts involved. It is nearly impossible to pay for a house with a $5,000 limit. However, a lender won’t sanction the funds unless he or she thinks you are a trustworthy person. This is where a credit card comes in handy. By accessing a person’s history, they can tell whether he or she pays on time. If they do, the rating will be high and so will their chances of securing a loan. The truth is you need a card to build your score.
The Balance Transfer
You did everything right but the loan still came back to bite you on the ass? Don’t worry because it happens to lots of people. The key is to search the internet for deals and find one which negates the interest. It’s called transferring the balance, and it’s the last resort. All you have to do is find a competitor with a good deal and switch accounts. Just be wary of the rate as well as the transfer fee. After the transaction is over, there is no reason to fret for another year. Some people transfer their balance for years until they pay off the total amount.
The answer is no – credit cards don’t equal doom and gloom. There are hazards, but there are potential benefits too.