Credit cards are not yet replacing cash and they may not will, but modern consumers have increasingly higher dependence on them. These cards simply represent one of the most important financial trends in our history. However, there are many drawbacks of owning credit cards and here are some of them.
- High Interest Rates: No matter how we see it, we always pay too much when we use credit cards. 18 percent is the average interest rates and it some cases, they could reach more than 30 percent. It is generally unfeasible to fund our purchase using credit cards and they should be used only during emergencies. We often heard that we earn a penny by saving a penny, so using credit cards for non-crucial purposes isn’t a good thing.
- Penalties: We may make late payment often and this will cause us to pay the credit card penalties. Penalties could increase progressively and it is much easier for people to sink into debt when they pay penalties too often.
- Promotional Offers: Many of us have received offers from credit card companies that promise huge savings by using the cards. In general, many of these promotions actually have hidden prices. For example, we may get 10 percent savings, but the company could increase the interest rate to 25 percent for such a purchase. Also, if we don’t pay it in full, we could be looking at a much higher interest rate. Obviously, credit card issues promise us with many rewards, but they are useless if we need to pay an arm and a leg, due to the exceptionally high interest fees. Worse, many people tend to spend more than they could actually afford if they are enticed with rebates, discounts and price cuts.
There’s a huge difference between overspending and borrowing. When we use credit cards, we essentially borrow money from a lender, so it is imprudent to overspend. People who overspend may not have a plan to pay the money back and it is easy to overspend when we have credit cards. When we use credit cards, we don’t have the experience of feeling and seeing our hard-earned money leave our hands. Everything feels much easier and this could cause to lose track of how much we spend. Many people use their cards excessively and if they have reached their limits, they may look for other cards. In this case, we need to leave our cards at home and bring only a limited amount of cash when we want to purchase something or dine out. Dealing with physical, actual money should help us to save more of them.
Even if we read the fine print, we are bound to miss some of the essential details and the credit card companies don’t always tell us all the details. There could be clauses that cause us to lose a lot of money for the supposedly trivial mistakes. We should be aware that there are things that could be bad for us financially.