This is a follow up to my previous blog entitled
"How to Build A Strong Financial Foundation". I briefly discussed there something about Credit Cards as a part of the enumerations.
As an ordinary user of credit card, I will give you some advantages and disadvantages of having a credit card. Let us go first to its advantages.
Online Purchases or Bookings
Establishments and businesses such as airlines, hotels and online stores most often requires credit card when paying or buying to them. I used credit card when I booked my flight here in Cebu. There are other payment options they are offering but since we are bounded by the pandemic online payment is more convenient. They just add processing fee, about P250 ($5).
Increase Your Credit Rating
If you are paying your credit card bills on time, or advanced and higher than the minimum required payments, your credit rating will be high. This will be a record of the bank than you can use as an advantage on fast approval of your car or home loans or other mortgages.
Emergency Line of Credit
Credit card covers expenses that will arise unexpectedly when you are out of cash. This occurs when you have to pay and you don't have enough cash. We just have to bear in mind that this is still a debt or loan that we must pay partially or fully on time for it not to increase interest.
They are just some of the more advantages of credit cards. Let us go to it's disadvantages. I believe that disadvantages only come when you mismanage your credit card's purchases and payments.
Filing Up Interests
Credit card company requires a very small amount of payment. It is just more or less 5% of your total balance. If you pay their minimum required payments it means that 95% of the total amount due will again then earn interest. This may run between 2 to 3.5% in one month. It is like you are just paying a little less than 2%. So, my advice is to pay it in full or in significant amount so as to balance the increase of interest.
Credit Damage
As the opposite of good reputation in banks and financial institutions when paying in time, the exact opposite will happen if you will not be a good payee. Getting approval for your future loans or mortgage will be impossible for you once your credit line credibility becomes low.
Fraud Transactions
If you are not alert and wise you will end up as one of the many victims of fraud purchases. They are not part of the company but of shall we say syndicate. Their job is to get personal details from you, in the extent of getting your PIN and use your identity and credit line to buy for their own benefits. You will just be surprised when your bills tremendously increased.
Again I am not a financial advisor. What I am sharing are just based on my own experience as a credit card user and from the experiences of my friends whom I personally know.
Thank you for your time reading my blog.
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