Pros & Cons of Owning Credit Cards

Is it true that credit cards are evil? They can be the devil when it is used wrongly and recklessly. I do agree that extended credit should not be granted to all people. It's something like not giving an alcoholic another drink when they are drunk. When more alcohol is given, more damage and harm will be done.That is the same with people with reckless spending habits.

However, when credit cards are used in the right way, it can be a big help and also brings some other benefits. Before I share with you how I use my credit cards, I'll give a short summary on the pros & cons of owning creadit cards.

Pros:

• Helps to build your credit rating and credit history

It is easier for you to apply for a loan when you have a good credit history. The key word here is "good". The bad or good of your credit history is how you meet your bills, whether its on time, full payment or late payments or not even bothering to pay them at all. Banks & financial institutions would check this criteria whenever you try to apply for a loan.

• Convenience During Emergencies (Buying the latest Jimmy Choo's doesn't count as an emergency)
  

Lets just say your car is low on petrol but you only have a couple of Ringgits, some lint, a few business cards and your credit card in your wallet. And added bonus to this combo is that there is no ATM machine in site. This is where the credit card is handy. Its also handy in terms of not needing to lug around a whole twad of cash and making you a target for potential thieves.

• Online Purchasing

The internet has changed the whole way of shopping and payments. Take me for an example. I am usually lame with payments for my ACCA exam entry fees. If I pay through telegraphic transfer or bank draft, it may take a couple of days. So, I pay online using my trusty credit card. Some sellers also offer rebates, discounts or other money saving offers when you purchase online.

Flight tickets and utlity bills are some other items that credit cards are frequently used for.

• Even can help you get some extra cash 

Yup. It can make you earn back some money. This one I will tell you more in  a later posting that I will do "How I Use My Credit Cards".

•  Rewards and Cash Rebates

Some credit cards attach themselves to certain companies and their products. For example, I have a credit card that I took up just to take advantage of instant cash rebates given on petrol and it also has rebates for grocery shopping at the 3 big hyper-markets in Malaysia. That makes me happy.

Cons:

• Wreck Your Credit History & Credit Ratings

In the top part, I mentioned that it can help you in terms of obtaining a loan etc. But if it used wrongly, it can ruin your whole credit ratings. It can come to a point that the mention of your name automatically denies you a loan. That would really stink.

• Being Burdened by A Financial Obligation

It is fine when you get paid (through salary) and then you would be able to pay your credit card bills. But what if you get laid off from your job and with no other means of income. This would put you in deep shit. You would be blacklisted by the banks and financial institutions.

• Ruins Your Life and Effects Others
  

When credit cards are misused, people will feel pressured with the debt that is not hanging around their necks. The mounting credit card debts might make some people to turn to illegal financial helps such as loan sharks or Ah Long. Loan sharks can provide you with the money needed but the interest that they set for the "assistance" that they're providing is way more than interest charged by banks.

These loan sharks would not stop at nothing to get their money back. They will start to terrorise your family, friends and even those people that just know you by name.

There you go. Before you decide to fill in and send in that credit card application form, make sure what it is for and determine whether you are reasonable enough to own one.

Let me know your views on this. Is having a credit card evil?