Pros And Cons Of Using Credit Cards For Purchases

Credit cards are a staple in a lot of people lives and they’re used for a variety of reasons. They can offer convenience, additional rewards or just the ease of being able to pay off purchases. But like any other financial aid credit cards come with their own sets of pro’s and con’s. Understanding these and how they can impact you will help you make informed decisions about whether a credit card is right for you.

The pro’s of using credit cards for purchases

Convenience

Credit cards can just be convenient for shopping and paying bills. You won’t need to worry about carrying about cash or moving money into different accounts to make purchases. Although this can also be a con as it’s so easy to just tap a card to make a purchase.

You can buy now, pay a bit later

This is only a pro if used responsibly and isn’t for everyone. But a credit card can help you get products before you have the money for them. For example we sometimes buy slightly larger items that we haven’t quite finished saving for. Then we pay it off over the coming month. By doing this we can make the most of offers we may see, but also getting the item early.

This is also useful in the case of emergencies if you don’t have immediate access to cash. So if you get an unexpected bill you can use your credit card to help. We’ve done this before when paying off car repairs, as it then gives us a bit of time to work out which savings account we want to take the money out of to pay for it.

Rewards and cashback

Some cards will offer rewards for spending meaning you can earn points, airline miles or cashback. Over time, these rewards can add up potentially saving you a lot of money, or offering free perks.

I got my first American Express card for this exact reason as I got Avios points when I spent. And when we started renovations on our home we upgraded to the 20 as we knew we’d be spending a lot. Over the years we’ve had a lot of free or very cheap flights, along with free lounge visits and other perks.

Building a credit history

Regularly using a credit card and paying it off helps you to build a positive credit history. This will help your credit score which shows lenders how reliable you are at paying back debt. Having a good credit score will impact you when applying for loans/ a mortgage, or getting better rates.

Purchase protection

Most credit cards come with a purchase protection meaning if an item doesn’t arrive or you have issues you may be able to get your money back through your credit card issuer.

Added security

Credit cards offer greater security than a debit card when shopping. If your card is lost, stolen or your details hacked then your actual money in the bank will be safe. Once you contact your issuer to block the card you can look at claiming back any fradulent transactions. If someone gets hold of your debit card they can be taking or using your hard earned cash which may put you in a tough situation.

I tend to use credit cards when travelling for this reason as it makes me feel a bit safer.

The con’s of using credit cards for purchases

Temptation to overspend

Credit cards can add overspending, and it can be quite easy to fall into debt due to spending. Without seeing the physical money coming out of your account it can be easy to lose track of how much you’re spending, or encourage you to buy things you don’t need/ can’t afford.

Having a credit card is only a good bet if you have a good relationship with money and are sensible with it.

Interest rates and debt

One of the biggest drawbacks of using a credit card is the potential to get into debt. If you don’t pay off your balance in full every month then you’ll be charged invoice, and the invoice can add up.

Fees

Credit cards often come with various fees to keep your eyes open for. Some charge annual fees, like our gold American Express. If you fail to pay your monthly minimum balance you’re likely to be charged a late payment fee. Other fees can include foreign transaction fees if you spend abroad, or cash advance fees if you withdraw physical cash.

Credit score impact

While a credit card can help your credit score if used right, it can have the opposite affect if you misuse it. Missing a payment or having a high balance can harm your credit score, especially if you’re not paying much off it each month.

Should you use a credit card for purchases?

There’s no hard yes or no answer to this question as it really depends on your financial situation and you as a person.

If you’re disciplined and use it in the right way a credit card can be a great addition to your finances. However if you’re not responsible or start to rely on it for everyday spending it can lead to issues in the long run.

Do you have a credit card? If so how do you use yours?