We have to admit, credit cards have taken an important place in our financial lives. With the evolution of technology, the use of credit cards has been intensifying, both via the Web environment and through the available payment locations that are found in almost all establishments.
Granted, a credit card also helps immensely in times of financial tightening, creating liquidity in the monthly budget, however, are also the main cause of excessive debt. As in everything, there are benefits and risks and it is through the management of these two magnitudes that we can obtain the best results, hence it is necessary to know the benefits and risks of the Credit card.
Convenience and Safety
A credit card provides security because it eliminates the carrying of cash and signing or PIN (personal code) to use it. It is also an accepted payment method in most countries and because of the associated credit limit, it allows you to plan purchases more easily.
Free Credit Limit
Most credit cards allow you to enjoy a free credit period of around 20 to 50 days. If you have a 100% payment method you can use funds without having them and settle at the end of the term without paying interest.
It is very common credit cards with protocols that allow you to benefit from discounts, such as discounts on fuels, restaurants, clothing stores, etc …
There are also credit cards with cashback programs that allow you to benefit from their use, such as receiving 3% of your monthly usage.
The conscious and responsible use of a credit card allows positive signals to be given to banks and other financial institutions regarding their relationship to credit, in particular compliance and use.
Due to the ease of use and the possibility of having today all that you want credit cards tend to increase consumption levels leading to a revolving credit situation.
May impair credit history
Due to the risk of excessive use of the credit card, you may incur in delays in paying the debt, penalizing your credit history by sending signs contrary to compliance.
Credit cards have general conditions of use with heavy conditions that penalize the user whenever he / she does not comply with contractually stipulated obligations, for example, misplacement of the credit card allows the collection of commissions (to see how to avoid commissions read this article) by blacklisting and card replacement. Another example is the delay in the payment of the extract allows the charging of a late fee of around 10 euros on most cards.
High interest rate
If you check the maximum rates for consumer credit published by the Bank of Portugal for each quarter, you can check how far the interest rate of credit cards can go. On average the interest rate of a credit card is around 16 to 20% which reveals a considerable burden if you want to use the installment credit line.
Tips and Recommendations
Arguably, it is through the prevention of associated risks that having a credit card can bring benefits to your user. Preventing risks is knowing our credit card tips and always bear in mind that you are only exposed to them if you do not comply with the contractual conditions, such as delaying the payment of the invoice, damaging or misplacing the card, not having a payment of 100 %, among others.
Be responsible with your credit card and watch our 3 key rules for using credit card.