Weighing the Pros and Cons of Credit Cards 2

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Most college students are bombarded by credit card offers. Each company tries to explain why using their credit card is a good idea. However, before before applying for your credit card, think about the pros and cons of credit cards.

Pros

  • If your car (or bicycle) breaks down on your way to campus, a credit card can be useful. At the same time, a debit card can work just as well for that purpose.
  • In addition, a credit card can cover your immediate expenses while you wait for your next paycheck or financial aid payment.
  • Wise use of a credit card can also help you establish good credit. If you always pay your balance on time, you will develop good credit which will make it easier for you to make larger purchases (such as a house) farther down the road.
  • A credit card enables one to make purchases online. This is a very important advantage in the minds of most college goers. On the other hand, one can also buy online with a debit card.
  • Credit cards have another advantage in that credit card loans are normally interest-free for about one month, depending on the credit provider.
  • In addition, a credit card allows you the freedom to go shopping with a thin piece of plastic instead of a bulky bundle of dollar bills.

Cons

  • Credit cards can also make shopping too easy, because the ease of use can encourage overspending.
  • Your credit card number can be stolen by online hackers, causing identity theft. This can be avoided by only doing business with reputable and secure websites.
  • Once the credit card payments get out of hand, it can be very hard to regain control. If you do not pay your balance off on time, you could windup paying $600 or more for just $500 worth of textbooks. You can experiment with different loan amounts and interest payments using a debt calculator.

There is no easy answer to the credit card decision. It depends on the person, the credit card company, and the individual situation. Often, a debit card will work just as well, but there are times when a credit card is important to have. Everyone must make the decision for themselves.

Tips for Credit Card Use

If you do decide to use a credit card, remember to follow these tips.

  • Look for long “grace periods”. “Grace period” refers to the period of time during which no interest accumulates on the credit card balance.
  • Read the fine print. Avoid cards with annual fees or other unnecessary payments.
  • Only carry one card. The last thing that you want to do is “max out” on several high-interest credit cards.
  • Check the percentage rates. Try to find a card with a low interest rate, and then make sure to pay on time.
  • Set a low credit rate. By setting a spending limit of $200-$1000 on your card you can avoid getting into major debt.

2 thoughts on “Weighing the Pros and Cons of Credit Cards

  1. Reply Vicki@collegeparentcentral Apr 16,2009 4:43 AM

    This is really important advice for students to consider. Most graduate with so much debt in the form of loans that adding credit card debt at high interest rates can make it impossible to get ahead for years.

    Just saw a news item this week that some credit card companies are considering lowering the credit limit for students.
    This is an important topic.

    Vicki

  2. Reply Avik Sep 16,2011 12:06 PM

    A credit card should be always kept for any emergency arising out of nowhere. Thanks for the insights and tips.

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