Credit cards are tightly integrated into the everyday life of every person, but despite this, many people remain adherents for cash payments (or payment by check). Using a credit card has both its advantages and its disadvantages, which must be considered when deciding whether to use a credit card for all expenses.
Credit Card Can Spoil Personal Finance Management
Credit cards can deceive you, because when checking the balance of the account, you see the amount that you have, forgetting that part of it will be debited as payment for the previous loan. The opposite situation is also possible when you see the amount of money, which includes not only your funds but also your credit limit.
This creates the feeling that you have more money than you actually have. As a result, you can spend more money, which you will regret later. In order that such problems would not arise, using a credit card it is necessary to take into account that the balance may not display the real amount of money in your account.
Paying by Credit Card You Pay More
When buying goods with a credit card, you usually always overpay. This is especially true for small purchases: food, inexpensive goods for home or clothing. When you pay in cash, you are better aware of the real value of things and money, as you can touch them. That is, you correlate real goods with real money. When paying by credit card, you see the real product, but do not feel the value of money. Almost always, when paying with a card, a person is ready to overpay or make an impulsive purchase.
In order to prevent this from happening, visualize the amount of money that you spend in cash before each purchase. I mean, just imagine in the mind the value of a certain product with paper money. This will help you get rid of impulsive purchases and overpayments.
Credit Cards Protect Your Funds
In case of problems with the purchase, you can always contact the bank to help resolve your problem. Also, if you have stolen a card, you can always quickly block it. It really works and is more convenient than using cash. An important point is the possibility of bargaining power in the event of a dispute with the seller. As a result, a credit card can help protect your funds in the event of unforeseen circumstances.
Credit Cards Allow You To Use Money More Efficiently
When we talk about saving money, one of the key points is budgeting. Budgeting is an accounting of income and expenses and credit cards allow you to do this without bothering. In your account, you can see the sources of income and your expenses for a certain period. In addition, most cards allow you to categorize expenses. If you use this function correctly, you can easily reduce unnecessary expenses and save a substantial part of your own money.
Also, cards have a function of automatic deductions to a savings account. Many cards offer cash back and other bonuses for using the card. If you choose the right card, you can save a substantial amount of money in the future.
Credit Cards Give Access To More Funds And Build Your Credit History
Do not underestimate the importance of good credit history. And one of the easiest ways to build it is to use credit cards. Also, credit cards give you access to more money than you currently have and you can use it wisely. It is important not to get involved in the use of credit funds and always control your balance in order to avoid a domino situation with debts.
If you do not manage to control the use of the balance, then you may find yourself in a situation of “domino effect” when a significant part of your income will be used to pay debts, and in order to live, you will have to use new credit money. To avoid this, clearly, control how much you owe on a credit card and how much you have to pay next month.
Credit cards open wide doors for you to shop and manage your own money. And you need to learn how to use these opportunities by choosing the best card that will give you the most bonuses (refund, extended warranty, point accrual). But it is also worth considering the risks that a credit card has, in the first place is the person’s tendency to overpay if he does not see real money.