The Disadvantages of Credit Cards
The key word for credit card use is ‘easy’. Credit cards make things easy: so easy to buy, so easy to order, so easy anywhere in the world. And so easy to get into debt and that’s a ‘downer’. Are there others?
A hill of beans
You can very quickly lose track of how much you’ve spent on a credit card. Lots of small purchases soon add up to a whole hill of beans and before you know it, there you are faced with a large sum on the bottom of your statement that you weren’t expecting and how to pay it off is a problem.
So it sits there and costs you a fortune until slowly bit by bit you chip away at it ‘til it’s gone… hopefully. That’s a good scenario. There are plenty of people who have got very seriously into debt through credit cards. And it the fact that its so easy to do so that is their big disadvantage.
Keep it up
You may have trouble keeping up repayments on a credit card that’s got a substantial balance on it. Especially if you work in a job that provides regular overtime and suddenly that gets cut. It’s not always easy to keep up all those financial commitments and if you miss a payment or start paying late it can affect your credit rating.
Credit cards might be easy to use and give available money easily but you pay for that privilege. It’s the easiest and most expensive way to borrow money. Sometimes the cost isn’t worth the convenience.
Credit cards can be confusing with all the jargon used to describe different rates of interest for different transactions and for how long. Credit card companies in the UK are now obliged to feature an ‘honesty box’ on their advertising, showing clearly what APR they are charging for what credit transactions. This was in response to public demand and in an attempt to make these issues as clear as possible. APR itself was introduced primarily as a way for the public to be able to compare like for like on different financial products. But there is still the danger of getting very confused by it all.
Having too many credit cards can be a real headache. Once you start using different ones you will get into a right mix up about which pay dates are due when, so the least that can happen here is that you increase the chances of missing a payment date. Then there’s the temptation to start jumping payments from one to the next, but that’s really only a way of deceiving yourself and not facing up to the day when you will actually have to pay the debt back.
Your twin uses your card too, right?
Then there’s the whole issue of identity theft. As the UK’s fastest growing type of fraud it has to be taken seriously. Although the credit card companies are doing all they can to combat illegal activity by introducing chip & pin and security numbers some credit card owners still appear to lose all sense of logic when it comes to giving people confidential information about their cards.
A problem compounded
As we all know, interest charged to outstanding balances can be very high. Not only that, unless you read the small print you aren’t going to be prepared for the way interest is charged on your card. For example, if you move a balance across from one card to another that transfer will be at a very low rate. But if you go out and purchase something else with that same card the new purchase will be at a very high rate and it won’t ever shift off your card until the balance transfer sum has been completely paid off.
And so, as you whittle away each month at the balance, interest will be charged on top of interest and that’s compound interest; which is a great thing when you are investing, but not when you are trying to pay off a debt.
Today’s society is an “I want” culture and it’s an “I want it now” one at that. Only when we start to learn how to manage our finances and how to save earned money will we ever get rid of the awesome burden of debt that exists for so many in this country