Credit Cards – Sugar Coated Poison

One of the most important things is to know how much one can pay and the way that the payment is made. For any innovation, there are both advantages and disadvantages. Even credit card has its own advantages and disadvantages. In order to verify if it is good or bad, each person must identify usage pattern.

A credit card can (1) Grant free use of funds, provided the balance is paid in full always on time, (2) Be more convenient to carry than cash, (3) Help to establish a good credit history, (4) Provide a convenient payment method for purchases made on the Internet and over the telephone. By doing so, it gives the option to pay at any time, place and currency, (5) Give incentives, such as reward points, that can be redeemed, (6) Ensure to make payments irrespective of size, (7) Be used at ATMs for cash withdrawals in emergency and (8) Easy to avail flight/rail booking services

Credit cards have become the media for global exchange through companies like VISA, American Express, etc. All kinds of businesses from recreational facilities like pizzas to gambling allow the use of credit cards. The convenience of payment or withdrawal is the attractive feature.

On the other hand, credit cards can (1) Cost much more than other forms of credit, such as a line of credit or a personal loan, if the payment of bills are not on time, (2) Damage credit rating if payments are late, (3) Build up more debt than can be handled and (4) Have complicated terms and conditions. Credit card holders become big spenders, which eventually lead to debts.

The other most important fact to note about Credit card is that once any kind of contract is signed with a supplier for regular monthly payments, then a user or a holder of credit card will not be able to stop the payments by just contacting Credit card supplier. It is the supplier of services who can cancel the contract.

All the funds can be withdrawn which is allowed by Credit. Also overdraft is allowed such that the account goes to negative balance. This clearly means that the cardholders possess debt every month. This again can become a cycle such that the deficit cannot be covered each time when payment is done or new funds are deposited in. They will certainly end up in negative balance, which induces to take another overdraft. It thus gets out of hand, until some of the property is sold just to offset some debts. Gradually the lives of people get much difficult.

As conclusion, credit card has advantage of getting relief of credit period but in case of delayed/ non-payment the rate of interest is heavy. Credit Card is sugar coated poison. Once entered into its trap it is very difficult to come out of the vicious circle. This induces to purchase more especially with its discounts / offers and payment mode of EMI's. But it is not advisory to enter the trap.

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