8 Advantages and 5 Disadvantages of Credit Cards – Pros and Cons of Credit Card Consolidation,Counseling

Credit Cards in our debt and credit fueled economy have become almost as indispensable as cash money.It is impossible to think of days when Credit Cards did not exist.But Credit Cards are a recent phenomenon and their ubiquity is owing to the ease with which Banks give these Cards.The reason is that Banks make a ton of money through the issue and usage of these credit cards at the expense of the consumers.The hidden costs of credit cards are not known to the customers as credit card processors like Mastercard and Visa make billions of dollars each year.This money is taken from the vendors of goods and services which charge you for this extra money that they pay.However Credit Cards also have substantial advantages if they are used wisely.However as we know in case of credit and debt the human mind is not prone to prudence and care.Many Americans have wracked up unsustainable credit card debt and destroyed their lives.The reason is that you get easy credit on these cards .The incentive of short term pleasure buying stuff from your credit cards is too much to resist for most people.If the credit was unavailable then people would not have fallen into the problem of debt in the first place.

Credit Cards Advantages

1) Convenience – Credit Cards are very convenient in the sense that you don’t need a wad of money to purchase something.You don’t need to make sure that you have enough money,count it and then buy it.You don’t need to have enough wealth to buy something.You just need to pull out your card,swipe it and the thing is yours

2) Allows Online Purchases and Sales – Credit Cards have become an essential part of our internet economy and e-commerce as things can be bought online only through credit cards.Its not possible to pay by cash over the Internet so Credit Cards are essential if you buy things online.

3) Gives Rewards/Cash Back in some Cases – Credit Cards give rewards for high usage such are airline tickets and other goods.You  generally get some points for each time you use a credit card.These points are acccumulated and in the end you can buy something with those points.

4) Free Credit for a Limited Period – Credit Cards have a time period between billing and paying your bill in which the credit card does not charge you an interest.This interest free period is a benefit of the credit card as you save on the interest.

5) Saves on Not Carrying a Ton of Cash – For big purchase which needs thousands of dollars,carrying a large amount of cash is dangerous and difficult.For such purchases,Credit Cards are very useful as for $1 or $100,000 you just need the same old credit card

6) Allows a Large Purchase in case of Emergency – Credit Cards allow you to pay for an emergency when you don’t have enough moneny.In case of a medical problem where you need to pay something immediatly,a credit card can be very useful

7) Foreign Currency Transactions Ease – Credit Cards can be used in foreign countries without converting your money into foreign currency.Though this involves some cost,it is more convenient

8) Protection in case of Theft or Loss of Credit Cards – Credit Cards have 24/7 helplines where you can report the loss or theft of your credit card.This allows the credit card to be blocked so that someone else cannot use your credit card

Credit Cards Disadvantages

1) High Interest Rates – Credit Cards carry the highest interest rates of all the different types of loans and mortgages.They also charge you a lot of fines for delaying payments on your credit cards.

2) Debt Traps – Credit Cards are dangerous for people who have less self control or are shopping freaks.It allows you to wrack up debt easily as you don’t need to apply for a loan.You can have multiple credit cards and carry huge debt.You can be stuck in a debt trap if your monthly earnings can’t cover the interest payments on your credit card debt.Many people get bankrupt and have their life destroyed through credit cards

3) Complex Fines and Fees – Credit Cards have complex fines and fees which makes it very difficult for a normal person to understand.They have late payments and fines plus they also charge tax.They can add a variety of fees such as fees for withdrawing cash with your credit card etc.

4) Promotes Spending over Saving – Credit Cards make it easy to spend and harder to save.This proves to be deleterious in the long run

5) Credit Card Identity Theft – Credit Card Numbers can easily be  stolen by identity theft fraudsters.Billions of dollars are being lost every year through credit card number theft.It is much easier to steal credit card information than cash.Online crime thrives on stealing your credit card details .

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Pros and Cons of Credit Card  Consolidation/ Counseling

1) The biggest Pro is that you may get a lower interest rate by consolidating the credit card debt on multiple credit cards.You can shop around for the cheapest rate which will reduce your monthly outgo

2) Another Pro is that you can have a single card to track your debt and payment instead of tracking many dates and payments

a) Cons of Credit Card Consolidation is that you cannot spread your payments on multipe dates instead you have to pay a lumpsum on one date of the month

b) Another disadvantage is that credit card debt consolidation will only delay your problem but not solve it as cannot help you in the debt trap case.

Credit Card  Counseling Pros  are

a) Work with your creditors to help reduce the amount of interest and late fees you owe

b)Build a Debt Management Plan

c) Help you consolidate credit card debt in case you need it

d) Give you lesson on financial literacy

e) Help you in bankruptcy if that is the best way out

Credit Card  Counseling cons are

a) It cannot solve your debt problems for you,it may give you the illusion of help but you need to solver your problems yourself

b) Bad Credit Card Counsellors might prove to be more costly and give bad advice

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