Happiness over a swipe, yes we are talking about credit cards. Two decades ago, credit cards were used by businessmen’s and affluent people, they were the people who could afford to obtain a credit card, it was considered as a prestige symbol. However, with competition credit cards reached to average income earners and the general public over time, nowadays, it’s very rare to see a person without a credit card. we have seen many people fell into debt due to credit cards, the happiness is no more after the swipe.

Credit cards are equivalent  to dangerous weapon; you can bring peace or create a war with it. But, everyone needs the weapon, the beautiful shiny plastic, little carelessness is enough to make it a mass destructive weapon.  We heard and experienced the horror stories of many of our clients falling into terrible debt.

“With great power comes great responsibility”

Here are the good and bad, the advantages and disadvantages of the credit cards, use it carefully and u’ll be happy.

The Good

Usability

Credits cards can be used  locally and globally, it gives you the flexibility of purchasing anything from anywhere, it’s very easy to use rather than carrying money, credits cards can be used for online purchases as well. Virtually, it’s accepted anywhere.

Rewards and Offers

Credit cards give offers and rewards almost every day, you have high chances of getting big percentage of discounts and offers when you use your credit cards, some cards offers the money back offers too.

Buy now pay later

You can buy any product and service using a credit card and pay back over a stipulated time period; it gives much comfort without draining your wallet at once. Simply, you are borrowing for free, but it has its own dangers and we’ll discuss this later.

Emergency protection

Having a credit card (with available balance) is really an emergency protector, most of us monthly income earners and it’s very obvious that our wallet cannot stand on an emergency medical bill or unplanned expenses.

Security & Protection

Using a credit card can save you from losing your money from online scams and fraudulent transactions as each every transaction monitored and recorded.

The Bad

Interest rate

Credit card purchases are interest-free for a number of days only (days may vary depends on the provider), after the credit period you will be charged interest which is approx. 18% to 24%, this is very high-interest rate comparing to other loan products. You can either pay off purchases in full before the grace period ends and avoid taking on interest

The hidden trap

It’s important to remember that a credit card is a form of borrowing, Buy now pay later and all the offers and rewards are to make you use the credit card, the catch is here, most of the card providers want you to service only the minimum commitment so they can earn the interest, beware of this trap. Make sure to think twice before swiping the card, try and pay your credit card bill within the credit period, servicing only the minimum commitment will rack up interest and you will be in life long debt.

Late fee & Hidden fees

If you miss a payment and you will need to pay a late payment fee, also it will get reported to your CRIB report as well. You must know about the charges, interest rate and late fees regarding your card, it will help you to reconcile your credit card statement; otherwise, there are chances to pay a lot more than your actual payable.

Hit on your CRIB report

Most of us never think about our credit report till it gets tarnished by our bad repayment records, miss a payment and it’ll get reported to your crib report, having a credit card related issue in your CRIB report is really embarrassing. Make sure to settle your bills in time, also make sure to rectify issues or error reporting with your card provider to have a good CRIB report.

For some people, credit cards can be destructive. But as long as you can use cards wisely, they’ll serve you well. If you use a credit card cleverly then it’s possible to borrow for no cost, get extra protection on your purchases and even earn cash back or rewards, swipe carefully, swipe mindfully, happiness is always yours.

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Want more advice on credit cards? Talk to us and we can help you to use your card wisely, we assure you best and confidential service . The expert advice you can trust and rely on. Write to us on ask@advisor.lk