pros and cons of owning a credit card


Should I Get a Credit Card?

Contrary to popular belief, it is not a good idea to carry a credit card balance each month. It is best to avoid running up your credit card balance. Credit card debt has several serious consequences.

Repaying Debt is Hard

One of the reasons that many people opt for a debt settlement program is because they are struggling to make payments every month. Getting into debt is easy, but paying it back can be difficult. Credit card companies know that it is convenient for people to use their credit card. That is why they tempt people to spend more money than they can afford by raising the limit.

Credit card companies also charge interest. If you have a credit card with a $5,000 balance and a 20 percent interest, then it may take you a decade to pay it off if you only make the minimum payment.

Your Credit Score Will Dip

Many people think that credit card debt will not affect their credit score as long as they make the minimum payment. However, carrying credit card debt can ruin your credit. Your credit utilisation rate is one of the factors that determine your credit score. It is the ratio of the amount that you owe to the limit that you have.

For example, your total credit limit is $10,000. You owe $6,000. Your credit utilisation rate is 60 percent. A high credit utilisation rate will decrease your credit score. You will need to keep this number below 30 percent.

You may Miss Payments

There are a variety of things that can happen that will cause you to miss payments. For example, you may get sick or lose your job. Unfortunately, credit card companies are not too forgiving if you miss payments. You will be charged a late fee. Late fees will make it even harder for you to pay off your debt.

Your credit score will also decrease. Every time that you make a late payment, you will get a negative report sent to your credit. This will cause your credit score to decrease. Furthermore, once you fall behind on your payments, it is hard for you to catch up.

It Shows Financial Irresponsibility

The responsible person only charges what they can afford. They also make sure that they pay off the credit card every month. If they do not pay it off in full every month, then they may sure that they keep their balance as low as possible.

On the other hand, carrying a credit card balance is a sign of irresponsible spending. It is a sign that one is using their credit card to supplement their income.

Stress and Headaches

A credit card balance can cause you headaches and sleeplessness nights. You may constantly worry about how you are going to pay off the balance on top of the household bills you already have to pay. This stress can take a toll on every part of your life. You may have problems in your relationships. You may also start to develop health problems such as ulcers and heart disease. That is why a debt settlement program may be your best choice.