Understanding the Pros and Cons of Credit Cards

Florida is open for business once again and as people start emerging from their homes more and more, they are making up for lost time. On average, Floridians carry six credit cards and about $8,800 in debt, which is an increase of $409. That places Florida in third place for states that have the highest credit card debt, with only California and Texas outranking the Sunshine State.

Any increase in credit card debt is concerning, but that does not mean people should stop using credit altogether. While people do tend to focus on the dangers credit cards pose, they also bring many benefits, as well.

The Pros of Credit Cards

Credit cards can become a real challenge if they are not used properly, but the benefits they hold are undeniable. Most businesses today accept credit cards, meaning you do not have to stop at a bank machine to get cash every time you wish to make a purchase. In addition to this, credit cards have other advantages too, which are as follows:

• Pay over time: It is always advised that you pay off your credit card balance in full every month so you can avoid late fees and added interest. However, the option to make payments is certainly helpful, particularly when you want to make a large purchase but do not have the cash available at the moment.
• Reward cards: Many credit cards give borrowers rewards such as cashback, air miles, and gift cards. You will receive more rewards the more you use the cards and you can either redeem them or save them up so they accumulate into a greater amount.
• Introductory rates: It is not uncommon for credit card companies to offer introductory rates that are much lower than the standard rates. You may find a card that offers zero percent interest on balance transfers and purchases, although it is prudent to make sure you know how long these introductory rates last. Usually, creditors will only offer them for six months or so.
• Better security: Credit cards do come with some security risks, but they are much lower than other financing methods, such as a bank account. If someone can access your bank account, they can completely drain it. You will have to wait for the bank to investigate before the funds are replaced if they ever are. On the other hand, if someone steals your credit card, they may access some of the funds, but a quick call to the credit card company will prevent them from spending near or over your limit. The creditor will place a freeze on the card and may even reimburse you for the purchases you did not make.
• The right to dispute: If the credit card company makes an error on your bill, you have the right to dispute it. As long as you dispute the mistake in writing, you are also not responsible for paying for the purchase, unless, after an investigation, the credit card company can prove that you are responsible for it.

The Cons of Credit Cards

With the average credit card balance for Floridians being $5,623 in 2020, it is clear that many people know all too well about the disadvantages credit cards can hold. The majority of the drawbacks that come with credit cards are a result of a person’s credit limit or the total amount they can spend on their card. This credit limit gives people the illusion that they have more money than they actually do, and sometimes they have no problem spending those funds. This results in many undesirable impacts, including:

• Reduction of future income: Every time you use your credit card, you are reducing your future income. Using a credit card means spending money you do not have and so, you will have to repay that money at some point in the future. The more debt you incur, the more difficult it will become to pay off, and the more of your future income you will lose. This is particularly true if you continue to use your credit card but only pay the minimum amount due each month.
• Fees and interest: Depending on the interest rate you are charged, and how you use your credit card, it could end up costing you thousands of dollars a year. Every time you make a late payment, you will be charged a fee and they can add up pretty quickly. It is important to know your billing period, as well as how compound interest works so you can avoid these fees and interests.
• Identity theft: People can commit fraud and identity theft without ever even accessing your credit card. If they hack into the computer of the credit card company, they can obtain your personal information and use it to rack up charges although you likely will not be held liable for them.
• Lower credit scores: If you use your credit card too much and cannot pay it off, it will appear on your credit report and lower your overall credit score. This will make it more difficult to obtain credit and loans in the future, and could even impact other areas of your life, such as if you are trying to obtain employment.

Even with the most responsible use, sometimes people experience these drawbacks of credit cards. The best practice is to ensure you do not spend more than you can afford by paying off the balance in full every month.

Call Our Debt Defense Lawyer in Fort Lauderdale Today

One of the biggest drawbacks that come with credit cards is the fact that if you fail to pay them, a creditor or debt collector may file a lawsuit against you to recover the funds. When this is the case, our Fort Lauderdale debt defense lawyer at Loan Lawyers knows the strategies that can help. Call us today at (954) 523-4357 or contact us online to schedule a free consultation and to learn more about how we can help.