A credit card is a valuable financial product that we use to make everyday purchases. But its actual stems from the fact that it provides us with extra money in times when we’re short on funds.
That said, despite credit cards appearing as magical money producers, we need to come to terms with the fact that credit cards do not come without any downsides.
In this article, we’ll go over all of the essential benefits of a credit card, but we’ll also take a look at the drawbacks, to help you decide whether a credit card is the right fit for you.
Credit Card Advantages
Credit cards come with numerous advantages. Whether it’s dividing the purchase of expensive goods into installments, receiving rewards upon registration, or paying for your coffee in another country, we will delve deeper into all of these perks in this article.
- When you first sign up for a credit card, various bonuses come along, provided that you spend a certain amount of money in the first months of your credit card utilization. This is one of the many features of a credit card.
Read more: Best Prepaid Cards in Canada
- Credit card facilities have thought of many ways to attract new customers, some of which being the cashback programs of up to 6% for every time you use your card.
- Some gas stations, airlines, and hotel chains are in partnership with various banks, allowing cardholders to receive a reward in the form of a gift card, flyer miles, or discounts at certain retailers, at all credit card uses. Just make sure to get a card that mainly applies to your needs.
- Card issuers provide you with extra safety if you have your card stolen. Should you find yourself in such a situation, just notify your bank to resolve the issue and restore your money.
- If you struggle with paying your credit card balance in time, you might want to consider choosing a bank that offers a grace period, which allows you to enjoy a certain amount of time before you start paying out your balances.
Read more: Best Secured Credit Cards in Canada
- One of the most significant advantages of a credit card is insurance. Today, credit card advantages include travel insurance, car rental insurance, and even purchase protection and product warranty. That’s something.
- Credit cards are universally accepted. You may find yourself lacking cash in the correct currency during your travels, but credit cards allow you to overcome such issues. Many hotel chains only accept credit cards as a way of payment since they can charge you extra if you cause any damage to the inventory.
- Purchasing items in a currency other than Canadian dollars may cost you nothing because some banks don’t have foreign transaction fees. This can be quite a helpful feature during travels.
Read more: Best Aeroplan Credit Cards
- Using your credit card responsibly could help you build a line of credit, which is one of the biggest pros of credit cards. Having a good credit score will, in turn, show your bank that you are creditworthy, allowing you to apply for bigger loans and lower interest rates.
- Your account will record each purchase you make, so you can always track your monthly expenditure. This recordkeeping can help you plan your monthly budget and ensure that you don’t miss out on essential payments.
- One of the biggest advantages of a credit card is how convenient it is to use. There’s no need to worry if you’ll have enough money to pay for that laptop you wanted to buy, and you don’t have to carry a bunch of cash with you at all times either. Just swipe the plastic and pay later.
Disadvantages of a Using a Credit Card
With so many advantages, it’s easy to forget that credit cards have their drawbacks as well. But they do, so let’s take a quick look at them!
- If you’re not responsible and do not pay off your monthly credit before the billing date is due, interest can accumulate, and you are risking falling into debt. Luckily, research shows that Canadians are well behaved when it comes to balance payments, with 70% of Canadians paying their balance in full every month.
- Some banks will charge you additional fees such as annual fees, ATM fees, foreign transaction fees, or extra costs if you miss a payment. Thus, to avoid these types of disadvantages of a credit card, make sure to thoroughly read the terms of service when applying for a card.
- You might risk overspending if you’re spending more than you can afford. Don’t forget that the extra money at your service is still technically a loan and will eventually need to be paid off.
- One of the most significant disadvantages of using a credit card is that you risk damaging your credit score. Should you miss your payments and accumulate debt, you might find it harder to pay off your loan and miss out on career opportunities.
Similar: Credit Card Churning
Final Words Before We Go Shopping
If you consider yourself a responsible person regarding finances, you can definitely enjoy the benefits of a credit card. However, take the time to carefully study the contract before you decide on a particular card, to make sure that you’re signing up for the right product.