visaplus - Credit Card Benefits and Drawbacks

http://www.visaplus.co.uk/ - VisaPlus

Credit cards have both benefits and drawbacks. It is wise to consider both
before applying for a credit card. While they can be very useful, credit
cards can also be risky. Even people who are usually good with their money
get into trouble with credit cards. A credit card can be useful, but may
also end up putting you in a difficult financial situation if misused.

Here are some of the benefits of credit cards:

Withdraw cash 24 hours a day, anywhere in the world.

Buy online. It is the quickest and easiest way, and you are protected
against credit card fraud.

Repay in regular instalments. Typically, these incur interest.

Usually, there is an interest-free repayment period, which you can use to
repay your debt in full, interest-free.

One of the main benefits of using a credit card rather than a debit card is
the protection provided by the Consumer Credit Act. This says that if you
have problems with goods or services you can get your money back from the
card issuer if you can't get it back from the supplier.

Some cards provide purchase protection insurance, which pays out if
something you have bought with the card is lost, damaged, or stolen within
ninety days of the date of purchase.

A credit card can cost nothing - if you pick a card that doesn't charge an
annual fee and you always pay the bill in full every month.

A credit card can save you money if you choose one that earns you cash every
time you buy something. How much cash you get back is calculated as a small
percentage of the amount you have spent on the card. Some cards offer
incentives other than cash - Air Miles or shopping vouchers, for instance.

Even if you do not pay your monthly bill in full, a credit card can be
cheaper than running an overdraft on your current account, especially if
your bank charges a monthly fee as well as interest when you overdraw.

Using a credit card can work out cheaper than using traveller's cheques or
foreign currency to pay for things abroad. This is because the exchange rate
used by card companies to convert foreign spending into sterling is better
than normal tourist rates. However, because of credit card charges for cash
withdrawals, a debit card is better if you want to use plastic to buy
currency, whether over the counter or from a foreign cash-machine.

You can give to charity for free if you sign up for a charity credit card.

Credit cards are often cheaper than loans for short-term borrowing. You pay
interest on the remaining debt, not the full amount - and there are no early
redemption penalties.

Credit cards offer flexibility to match uneven income and expenditure
patterns: you choose what to pay off each month, between the minimum and the
total outstanding.

Their consolidated accounting enables one cheque to settle multiple
transactions – while all appear neatly on one pre-prepared statement each
month.

There is an automatic 'interest free' period per statement period.

Credit cards enable remote purchasing via the internet, by telephone or mail
order.

Credit cards can include additional benefits like insurance cover on
purchases, cash-back, AirMiles, Nectar or Reward points, and holiday
discounts.

Here are some of the drawbacks of using a credit card:

Credit cards can be unnecessarily costly.

Credit cards may be expensive for cash withdrawals

Credit cards may be expensive for foreign currency purchases.

Their credit limits can be insufficient for your requirements.

They encourage a 'pay now, worry later' mentality and make it too easy to
get into debt.

Credit cards are very open to fraudulent use.
Received on Thu Sep 20 2007 - 04:23:17 EDT