When used correctly, credit cards are a convenient financial tool. They allow you to pay for purchases in stores and online around the world, have a grace period of up to 3-4 months, during which you pay no interest to the bank. In contrast to the consumer credit, the card does not have to constantly “reopen”. Just pay off the debt of the grace period and use the card to pay for new purchases – the amount of available credit is replenished automatically.
Advantages
To begin with, let us look at the main pros and cons of the credit card. The advantages of this product include the following parameters:
- Grace period. This is the period during which you can use your credit card without interest. If you pay back your debt in full during this period, you can use your card without overpayment. The grace period can last from 50-55 to 100-200 days.
- Revolving line of credit. After you repay your debt you can use your card again under the same terms. Credit limit is constantly renewed until the card is closed
- Versatility. You can issue a credit card for any purpose – for daily use, payment for big purchases, for travel or as a reserve.
- Bonuses for purchases. Banks introduce a variety of bonus programs for credit cards – cashback, accrual of points, discounts and others. This is how they incentivize cashless purchases with cards
Disadvantages
That said, the credit card has several disadvantages to consider:
- High interest rates. They can be two or three times higher than a consumer loan with similar terms. The rate depends very much on the solvency and reliability of the borrower
- Restrictions on certain transactions. A credit card usually does not allow you to withdraw cash or transfer money. The bank charges a high fee for these operations, and sometimes stops the grace period and increases interest
- Fraud risk. Credit card security should be monitored very carefully. If the credit card or its details fall into the hands of a fraudster, you risk a large debt to the bank
- The psychological aspect. Proper use of a credit card requires a certain level of financial literacy and the ability to plan your spending. If you spend more than you earn, use the card improperly, and do not make payments on time, you can get into heavy debt.
Credit Card or Cash?
Using a credit card is much more convenient than using cash. There are reasons for this:
- A small card is easier to carry and store than a big wad of cash
- Credit cards can be used to make purchases over the Internet
- The credit card is easier to use while traveling abroad because you do not have to worry about currency exchange
- There are bonus programs for credit card holders, the most popular of which is a partial refund on purchases (cashback)
- Using a credit card underlines the status of the bank client in the eyes of others. This is especially true for premium cards.
At the same time, a credit card also has a number of disadvantages:
- A credit card uses borrowed money, which then has to be repaid with interest
- Banks charge a fee for some transactions – cash withdrawals or currency exchange
- Not all retailers accept credit cards
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How to Make A Profit with A Credit Card?
Modern credit cards do not lag behind debit cards: today banks offer credit cards with decent cashback and really tempting bonus programs.
So if you use your credit card wisely, pay your debts on time during the grace period, and even get cashback or other bonuses, you can earn good money on your spending.
Bonus programs are varied and extensive: there are cards specifically for motorists (with increased cashback at gas stations), travelers, self-employed, athletes. Everyone can find a credit card according to his preferences and make a real profit with it.
How to Properly Repay Debts?
Credit card charges are made up of several parts:
- The card issuance and annual maintenance fees;
- Interest on using the bank’s money;
- A fee for certain transactions, such as transfers or cash withdrawals from ATMs.
The card service fee may be charged as a single payment once a year or in equal installments each month, depending on the terms of the particular card. This will be helpful for you kroger credit card login.
A credit card is mainly designed for non-cash payments, and the bank most often charges a certain percentage for cash withdrawals. If you need to use cash from the credit card, it is better to choose a card with the ability to withdraw money for free. There are not many of these offers on the market, but they do exist.
If you do not repay the debt during the grace period, the interest will accrue for the entire period of using the money – from the first day of the debt.
The minimum payment is variable. It depends on the amount owed, the interest rate of the credit card and the number of days in arrears.
If you do not make a payment on time, the bank will impose a penalty (the amount is also specified in the contract).
The money deposited first goes to pay interest, penalties and fines, and then to pay the principal debt.
What Should A Great Credit Card Be Like?
A credit card that is convenient and profitable to use must meet the following requirements:
- A sufficient credit limit for the borrower;
- free issue and service;
- A long grace period during which you do not have to pay for using the bank’s money;
- possibility of drawing up a card online and delivery by courier to the house;
- availability of a cashback and/or bonus program.
If you are confident in your finances and want to get additional benefits, then feel free to apply for a credit card. Properly used, it will make a good money tool for any purpose.
Apply for a credit card only if you are sure that it’s right for you and that you’ll be able to use it properly. And most importantly, remember the advantages and disadvantages of credit cards.
We hope this article was helpful to you!