What are Credit Cards? What do they do? How do they work? How do we get one? Should we really get one? What are the advantages and disadvantages in getting one? These are just but a few questions that run through our minds when we think about these little rectangular shaped electronic devices.
But first, let us take a brief look at the nature of these devices. Basically, these are plastic cards issued to consumers by the issuing authority, usually a bank, and serve as a mode of payment for buying goods and services from a particular merchant. However, it is not the consumer who pays the seller of the goods and/or services. It is actually the entity or the issuing authority that pays the merchant. A sort of an agreement is formed between the consumer and the issuing authority, that the former will pay the latter for the usage of the card. The issuing authority then allows the consumer to use the card, and grants a credit limit according to the terms and conditions of the agreement. The convenience these instruments bring is an unparalleled advantage. You can always carry these tools with you, and you do not have to worry about not having any cash on hand at a particular moment. With just one swipe of the plastic card the transaction is done. These tools make transactions very convenient and fast. It saves you from the burden of counting your money and bringing it with you when you go out. Moreover, credit cards are also useful in unavoidable but necessary expenses or purchases, like a buying a surprise gift, or the sudden need to go to the hospital and the like. It also saves you from the hassles of borrowing money because your pay check will not be due until the second week. This way, you can make your purchases now and pay the bank, for example, later. Lastly, these are a more secure mode of payment.
The biggest problem that people face using these cards is the tendency to be impulsive buyers. These things can be very tempting and may encourage you to spend more money than what you actually have. Imagine you come across a boutique and you see something that you really want but you can’t buy it with your current cash on hand. But since you have a card, you can just use. Now what if that kind of situation happens to you more than twice a month? Moreover, the interest rates that you incur every time you skip paying your debt every month increase. This is why many people using these get into huge debts. In addition, these are prone to fraud, if you think that these cards are safe from being stolen, you are mistaken.
They may be stolen physically, when you lose the card, or digitally, when someone steals your card number either from a receipt or through the phone or your purchases over the internet. These instruments may make or break your budget. Of course it all depends on how you handle your spending habits. So before you grab one, try to think about it and ask yourselves these questions. Do I really need these cards? Can I handle my spending habits using them? Will credit cards be helpful for me or not?