Credit Cards: Trick or Treat?

With Halloween just around the corner, let’s talk about something that many people fear – a credit card. This piece of plastic can prove to be a double-edged (four-sided?) sword. While credit cards have their benefits, they certainly have a scary side too.

TRICK

Here are some reasons why people dread credit cards:

1. Overspending Fears: Many individuals fear that owning a credit card may lead to overspending. However, this can be a problem with other forms of payment such as cash or checks as well. The real strength of a credit card lies in its ability to track a person’s spending in real time. A cardholder can not only keep an eye on his account online, but also set alerts to remind him once his spending reaches a pre-set limit. Now that’s something that good old cash just can’t do!
2. Annual Fees Jitters: Many credit cards demand annual fees, and, in many cases, this charge is justified by the rewards and premium benefits offered. Nevertheless, many credit cards (find examples here), provide great benefits and don’t charge any annual fees.
3. Payment Date Anxieties: Although a cardholder is likely to incur late fees and penalty charges if she misses a payment, this situation can be avoided by setting up reminders or using the issuer’s auto-payment system. Additionally, it is possible to opt for cards that have no penalty fees or late interest rates such as City Simplicity. However, it should be kept in mind that late payment is not a desirable practice, as it can hurt the credit score of the individual.
4. “Other Fees” Nightmares: Once cardholders scale their fears of obvious fees like annual and late fees, they might have to contend with other fees such as foreign transaction fees, cash advance fees and balance transfer fees. Luckily, simple cards are available which don’t have one or more of these fees.

TREAT

Despite their drawbacks, if used carefully, credit cards can also prove to be extremely advantageous. Here are some examples.

1. Building Credit: Using a credit card responsibly is one of the easiest ways to build credit. Even if you don’t have plans to take on any sort of loan in the near future, a good credit score is valuable as it can help you rent an apartment, get car insurance, or sign up for a cellular plan. Good credit can be essential if you one day choose to buy a house and get a mortgage.
2. Rewards Offered: Many credit cards have travel or cash based rewards for card usage that usually run up to 1 -2% of total purchases. These rewards are beneficial only if an individual pays off his balance in full every month, as no card offers rewards higher than the interest rate charged.
3. Protection Liability: Cash, once stolen or lost, cannot be recovered. Even in case of debit cards, fraudulent charges may not be covered. Unless reported within two days, liability for fraud on a debit card is up to $500, and after 60 days, the card holder is liable for every dollar taken out of his account. On the other hand, if a credit card is stolen, the individual is not liable for more than $50 – and even that is rarely collected. In cases where the person still has possession of the card and only the information is stolen, she is not liable for a single cent.

At Fund&Grow, we help provide individuals with reasonably good credit the money they need at excellent terms. Credit is provided with a money-back guarantee on services. Armed with seven years of growth and success, we are able to arrange for our clients the most competitive loan packages on the market. Contact us (800-996-0270) to learn more about how we can help you to achieve your financial dreams.