When purchasing goods, consumers are able to use a variety of methods to complete a transaction. One popular option is a credit card. Since gaining popularity in the 1960’s, the credit card has become an essential tool across all facets of day-to-day life. With the availability of other payment methods, credit cards have been viewed as both advantages and disadvantages in exchanges. So, what are these advantages and disadvantages that consumers should be aware of when using a credit card?
Flexibility
One advantage of using a credit card in a transaction is its flexibility in terms of spending for the consumer. Because credit cards are based on a “buy now, pay later” system, consumers may purchase items without initially paying with their own money. This is extremely helpful, as the consumer is able to keep the money they have to pay for emergency circumstances if they occur.
A danger to this flexibility, however, is overspending. Because the consumer does not have to pay for a good out of pocket, they may overspend on goods for which they cannot pay when the bank sends them their statement at the end of the month. This will cause the consumer to fall behind on payments and accumulate interest on their debt. So, although the consumer has the luxury of paying later, the consumer must be conscious of how much they spend during the month to ensure they don’t overspend and create credit card debt.
Fraud
Because using a credit card does not initially require a consumer to pay upfront, the consumer is protected from fraudulent purchases. For example, if someone steals your credit card information and makes a transaction, the card owner may dispute that charge to avoid being held accountable for the fraudulent purchase.
Disputing charges, however, may be troublesome for the owner. To dispute a charge, the owner must call their bank, which may take some time as the phone operators are busy with other clients. So, consumers must be careful with their credit cards to avoid fraud in the first place.
One advantage of credit cards in theft or fraud is their limited access to funds. As opposed to a debit card, where a criminal could empty out someone's entire bank account, with a credit card, they would have limited access to the amount of money below the credit limit on the card.
Online Shopping
Today, many companies have an online store where consumers are able to purchase their in-store or online-exclusive products. Credit cards are useful as they allow easy transactions on these types of sales.
An issue, however, that could arise is scams. On some lesser-known websites, some companies may deceive the customer by falsely advertising a good. Because a credit card is so easy to use online, consumers may not give as much thought to the purchase as they would when purchasing in a store where they can see the goods. This may lead to unnecessary spending on goods and result in overspending.
The Bottom Line
From the factors mentioned above, credit cards are beneficial if used properly. If you are conscious of your spending habits and eager to build credit, a credit card may be a great fit for you. If, however, you find yourself constantly buying things you don’t need and have an insatiable desire to shop online, consider opting for a different payment form.