Are credit cards good or bad? – Advantages and risks
Many people ask us if they are worth it. Especially, people who have had a credit card debt and have realized the high interest that banks can charge ? (Wiggitt was created to help these people). Therefore, we decided to give our point of view.
Like everything in life, credit cards are not perfect. They have their great advantages, but also their dangerous disadvantages.
First, it is important to mention what are some of the risks of having a credit card.
Interest rates are the highest there are
The interest rates of credit cards are usually the most expensive that exist, compared to other types of credits (personal, automotive, mortgage, etc.). In Mexico, the situation is even more worrisome. In a study by Frank Suddam, it was found that the declared average credit card rate is 37.76% per year. And in some cases, they can be up to 96% ?!
They are confusing, and they are not transparent
Many people do not know the operation, the interest rate, the way they calculate those interests, or the cut-off and payment dates.
Credit cards commonly charge commissions
Most credit cards charge annuity, late payment fees, among others. It is worthwhile to find out about (and try to avoid) the commission charges that your credit card has specifically.
The pain of paying is less with credit cards
Studies suggest that the “pain” we experience when paying for something is significantly less with a credit card, than the pain experienced when paying with cash. The reason is that paying with a plastic is less tangible, less visible and adds distance between the expense and when you actually make the payment (since the statement comes weeks later). That is why there is a risk that we spend more than we should with credit cards.
Now, we mention the benefits of having and using your credit card.
You can create a good credit history
Credit cards allow you to create a good credit history that will allow you to access better credits. This is very important if you later want to buy, for example, a car or a house.
They are safer than cash, or debit cards
When your credit card is lost or stolen, you can cancel it and request a new one in minutes. Cash, on the other hand, disappears forever. Also, if you detect that someone else uses your credit card, you can call your bank and in most cases they will withdraw the fraudulent charges. Eliminating unrecognized charges from your debit cards is usually much more complicated.
You can accumulate points and access interesting benefits
Most credit cards provide some rewards, insurance and purchase protection program. Check with your bank what benefits they have available, and take advantage of them!
You can access a financing of up to 50 days without interest
If you play well with the dates (cut and payment) of your credit card you can access financing, free of interest, up to 50 days. At a minimum you can pay your purchases 20 days after they are made (time between the cut-off date and the payment date).
In conclusion , we must be careful when using our credit cards, but using them in an indicated way can help us significantly in comfort, security and to obtain benefits and rewards. What is important is to inform us and know how and for what it is convenient to use them.