Credit Card Advantages and Disadvantages
A Credit Article Contributed by Girish Katyal
Using Credit Cards
When you use a credit card to buy something or to make a payment for telephone bill or anything else you are just taking a loan from the credit card issuing company which is to be paid later by you according to the terms and conditions settled earlier between you and the credit card issuer.
When you want to make a payment using your credit card for the goods purchased you usually give your card to the cashier and then he will electronically contact the company which issued you the card through the card network (Visa or MasterCard) to verify your credit card details such as account number, expiration date and credit availability. And if everything is in order then your transaction will be honored and the payment for the goods will be made.
The merchant will get the money from the card network, which will collect the money from your card issuer, which will bill you for the money in your next statement. And then it is up to you to make your payments in time. You can either pay your bill in full or in part, or you can only pay the minimum amount due and the rest of the balance will be taken forward as an extended credit.
Benefits of Credit Cards
Credit card payments are accepted worldwide. You can purchase practically everything (with in range of your credit limit) from anywhere in the world. You can pay for goods you buy and for the services you utilize. You can also pay for the goods in monthly installments using your credit card. Credit cards are easy to carry and are easy to use whenever you need to pay for the goods and services either in person, or over the Internet and on the phone.
Most of the credit cards now a days give insurance or accidental cover to their user either free or at discounted premium rates. It is also useful in an emergency, such as paying for unexpected medical care and expensive auto repairs. Credit card issuing companies offer many other benefits to there members like giving points for every purchase they make and reimburse these points for cash or credits.
You can also withdraw cash (up to the cash withdrawal limit) from many the branches of the issuing company or from various ATM's all over the world. They can be easily replaced when you loose them.
Disadvantages of Credit Cards
The most important drawback of using credit cards is the interest rate associated with it. The rate of interest charged is very high and therefore most people avoid using. Also the period for which the credit is provided is much lesser usually less than a month. Then there are annual fees associated with most the credit cards. You are charged annual fees for each card you hold whether you use it or not.
Keeping up with you're your credit card payments is difficult for many, more so for those who don't understand how it works. Then there are penalties for defaulting payments which are very high.
