The Disadvantages of Credit Cards


Authored by Lori Godin in Credit Card 
Published on 01-10-2009

There are many disadvantages to credit cards. Despite the convenience consumers rely on the cards for, they come with high costs and the risk of accumulating unmanageable debt for the consumer. Here are some of the main reasons why credit cards should be avoided, the main disadvantages that come with credit card use.

Some credit cards come with a high interest rate. If you are carrying a balance month to month, this can end up costing the customer more. The higher the interest rate of the credit card you are carrying a balance on, the higher the minimum monthly payment is going to be. Take this into account when looking over the credit card contract. Is the interest rate locked in?

Credit cards can get consumers into trouble. When most people use a credit card, they are not thinking about when they are going to repay the meal out for family or the new outfit for the weekend. No, these customers are thinking of the short term gains. Experts have theorized that this is the quickest road to credit card debt.

Credit card companies target those with newly developed credit rating, those with mediocre credit ratings and students because these customers are going to be offered credit with higher interest ratings. What does this mean for the credit card company? It means that these customers are going to pay higher financing charges for purchases made with the card, as well as these customers are potentially more likely to carry a balance because of their limited income and unfamiliarity with credit.

Credit card use should only be attempted by those with a good understanding of credit ratings, credit files and how the system works. Carrying a balance should be avoided as it can be costly and decrease your credit rating if the balance is over thirty percent of the limit.

Too many customers fall into the trap of using credit cards to cover the shortfalls in their income. When this happens, the customer can be faced with thousands of dollars in credit card debt, on multiple credit cards. To avoid this simply use the credit card for only what you can afford and be sure to cover shortfalls in income by creating new income.

When these customers are carrying a balance from month to month, they can end up paying double the price of the item when it comes to interest and financing charges. Next time you pull out your credit card to pay for something, think about the repayment schedule and how much this item is truly going to cost if you put it on plastic!


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