Are Credit Cards Really Worth the Hassle? | Finance Guider

It may be surprising but many consumers today are cutting up the cards and deciding to give up on credit completely. Consumers have a love-hate relationship with credit cards, and many financial analysts believe that credit cards are damaging to a solid financial future. Credit cards used to be a convenient way to pay for things without carrying cash, but now debit cards are common and easy to use; the credit card?s only purpose appears to be to allow people to live beyond their means.

What is a Credit Card?

A credit card allows a consumer to purchase an item today and pay for it later. If the consumer doesn?t pay for it within a month, they are charged a fee. The credit card company will also often charge an annual fee for the card?s use, and it will charge fees for any late payments. This is how the company funds itself ? the credit card company is in the business of fees.

A responsible card owner will pay off the bill at the end of every month. But responsible credit card owners are rarely the ones using credit cards. If the money is there at the end of every month to pay the credit card bill, it likely means the money was there the whole time. This means that there?s no advantage to using a credit card over a debit card.

Credit Cards as Short-Term Loans

The only time a credit card becomes useful is as a type of short-term loan. Up to half of those who carry credit cards carry a balance on their cards. This means that, essentially, all of these people who are carrying a balance have engaged in small, short-term, high-interest loans from the credit card company. Credit card interest rates are often up to twice as high as traditional loan rates, which mean that these people would be better off getting a loan. However, most people don?t consider a loan because they?re usually making small household purchases ? purchases they might never make if the ease of the credit card was not there.

Proponents of Debt

Credit cards facilitate debt. They make it easier for consumers to get into debt and they make it easier for them to stay in debt. However, there are some reasons that having at least a few open credit lines is necessary. The way the credit score system functions, you can?t get good debt like mortgages without having a solid history of bad debt like credit cards. This means that to some extent credit cards, and the use of them, are a necessary evil.

Responsible Card Use

When properly used, credit cards can be a part of a healthy financial outlook. But properly using a credit card is difficult. To use a credit card the right away, small amounts of money should be charged every month, and these amounts should be paid in full at the end of the month. Credit line increases should also be requested as often as possible, even though these credit line increases will not be used. By doing this, a consumer can gain the credit score benefits of a credit card without falling into the trap of revolving debt.

Meanwhile, those who don?t need to build up their credit report or credit score may have the right idea about ditching the cards. Debit cards can fulfill all the financial needs of a credit card without allowing a consumer to go into debt.

Byline

Kevin Roberts writes about finance, credit repair, economics, the national debt, international business and other related matters. Those concerned about their credit should click here view the resources of an established company in this niche.

Source: http://www.financeguider.com/are-credit-cards-really-worth-the-hassle/

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