Every notion in the world has its negative and positive sides. If you utilize the concept or commodity in a smart way, you would see pragmatic results. And, if you exploit the opportunity, you have to face the consequences. The same goes for credit cards.
Having a credit card can be both good and bad depending on how you use it. It can be beneficial if you use it smartly and wisely. And, if you can’t manage to regulate your expenditure and exploit the advantage of owning a credit card, you would end up in a messed-up situation.
Therefore, having a credit card can be both advantageous and disadvantageous depending on how you employ it.
Advantages of Having A Credit Credit:
Starting with the positive aspect of having a credit card, I would like to mention some advantages that a credit card can provide.
The advantages mentioned here can be attained only if you can act prudently by thinking, analyzing, and deciding on your actions. You have to learn how to use a credit card properly and absorb the benefits.
Here is why having a credit card is good:
Safety of your money is the first benefit that you get when you have a credit card. It saves you from facing losses caused by fraud.
With a debit card, you can lose money if someone else uses your card. And getting the money back is a lot of trouble. But in credit card fraud, you simply need to inform your card company. It won’t charge you the money that you didn’t spend and you don’t need to take the liability. The company resolves the issue and gives you the solution.
- Accepted Universally:
Credit cards are usable worldwide. It is convenient to use when you are abroad. You may not know how much you may need to spend and thus having a credit card would help. Also, carrying a credit card lets you do transactions worldwide easily and safely.
- Building Credit:
You can build your credit score by using a credit card. If you are wise about spending, your credit card company would deliver your payment record to the credit bureaus.
Now, the credit report would only include the credit report of your credit card, not your debit card. So, only a credit card report can help you raise your credit score. It also enriches your credit history making you eligible for big loans and other benefits.
Disadvantages Of Having A Credit Card:
Now let us see how credit cards can be a curse for users who are insincere and negligent. If you don’t learn to use a credit card responsibly, you can encounter serious problems.
I am mentioning some obvious disadvantages that you may face for acting irresponsibly:
- Lowering Credit Score:
If you don’t repay the expenditure to the company within the due date, you not only get to pay fines and extra charges but your credit score would go down too. The debts would affect your credit record and it would become difficult for you to manage loans further.
Poor credit history can impact your financial mechanisms and deprive you of certain benefits.
Here comes the most common problem. Having a credit card may encourage people to spend more and more without thinking of how to repay. And failing to pay back can be crucial for you in the future.
People tend to overspend when they have a credit card. This carelessness results in debts, late charges and fines, low credit scores, poor credit history, and so on.
- High-Interest Rate:
This is a disadvantage that comes along with credit cards. Credit cards have huge interest rates especially if you are in a month-to-month plan.
So, if you fail to repay the money on time, you would have to pay a high-interest amount along with the initial charges. The interest rate can go even up to 22%.
Do You Really Need A Credit Card?
You can be financially okay even without a credit card. Debit cards are pretty good as you can keep track of your spending. But people get credit cards mostly for emergencies.
While going abroad, buying an expensive commodity like a car, giving hospital bills, etc. you need a financial backup. For large transactions, a credit card is the best choice.
Therefore, having a credit card is a good idea for certain situations. But, exploiting the opportunity can be destructive and you need to keep that in mind.
Is It Bad To Have A Credit Card With Zero Balance?
In the short run, zero balance on your credit card can be beneficial. It would keep your utilization rate low which would enhance your credit score as a result. You can make small purchases each month and repay the amount within the due time.
You must buy something each month to keep your account active. Keeping zero balance in your credit card would give companies a reason to shut down your account. So, making purchases regularly is important. Besides, timely repaying the amount is necessary too.
If you maintain zero balance, buy a little, and keep paying back the amount on time, you would receive long-term benefits along with improving your credit score, report, and history.
Is It Bad To Have A Lot Of Credit Cards With Zero Balance?
Initially, it can be good to have multiple credit cards with zero balances. But afterward, it would considerably affect your credit score as the utilization rate would keep declining.
Also, lenders won’t be able to find sufficient records of your responsible behavior regarding spending and repaying the money.
Therefore, in the long run, your credit score would suffer if you keep zero balance in a lot of credit cards.
How Many Credit Cards Should I Have To Improve My Credit Score?
Having at least three credit cards can help you increase your credit score. If you have three credit cards and you are using one regularly and the other two occasionally, you can substantially improve your credit score.
How Many Credit Cards Can You Have Before It Hurts Your Credit?
Defining the number of credit cards one should have can be difficult. It totally depends on how you use them. But in general, it is never advised to have too many credit cards. You can have one, two, or maximum of three credit cards for large transactions and emergency backup. More than three credit cards can be troublesome to manage.
The chances of overspending increase when you have multiple cards. In that case, your debts would increase, and repaying the amount would become difficult. Mismanagement of money would then affect your credit score and record negatively.
However, if you can maintain the cards tactfully and repay the amounts on time, it would enrich your credit record and history. It would further help you get certain benefits.
Therefore, you should only have multiple credit cards if you can manage them properly and cautiously. Otherwise, it would be risky for you.
All in all, you are the one to decide what outcomes you want from a credit card. If you act irresponsibly, a credit card is bad for you. And, if you act wisely and smartly, a credit card is good for you.
So, in which category are you in?