3 Dangers Of Using A Credit Card
Credit cards can be a great tool when it comes to shopping online or even at a shopping mall. It is one of the banking products that are not easily accessible by customers. For a bank to issue you a credit card, you must meet some certain requirements.
The credit card benefit is really amazing, it is one of the products that allow you to earn cash back or rewards for your purchases. Another great advantage the card has is its ability to build you a great credit score when you frequently use it and pay back your debt. This credit score you make using this card can help you in the long run whenever you wish to buy a car or house.
With all of the amazing things mentioned about credit cards, there are some major risks attached to this card that you need to know before thinking of using it. If it is your first time applying for a credit card, then you need to put all of this into consideration before visiting your financial institution to apply for a credit card.
In this article, I want to ensure that you’re able to avoid making these mistakes when using a credit card because it will eventually put your finance at risk.
In as much as a credit card looks good and comes with some fantastic benefits, it also comes with some major setbacks. In today’s article, we’re going to discuss the dangers of using a credit card as an individual or a business. I’ll try to make you see the things the bank will never tell you about the credit card and how you can avoid being caught in the web of credit cards.
But before we dive into this major disadvantage and risk attached to using a credit card, let us look at some important things you need to know about credit cards for the sake of those who have minimal knowledge of credit and how it works
Also Read: Why most Nigerians will not get a credit card
What Is a Credit Card?
A Credit Card is a plastic card or metallic form card that is issued by a bank, financial institution, or company. The card allows users to borrow funds to pay for goods and services with merchants that accept card payments on their websites or app. With this credit card, the user will have to pay back the borrowed money on the card, and other applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time.
Dangers Of Using a Credit Card
If you remember above, I made mentioned some amazing benefits of having a credit card at your disposal. Despite all of this there are some major setbacks of using a credit card which can pose serious dangers to your finances.
Below are some of the Dangers Of Using a Credit Card and how you can avoid these dangers.
Credit Card Will Put You In Debt
As a user of credit cards for the first time, you may have the feeling that you’re spending free money. This small thought might make you feel like spending too much which at the end of the day may put you in trouble.
Studies and research have shown that a lot of consumers spend more when they’re paying with a credit card compared to when they pay with cash. Why is it so? This is because the users of credit cards usually want to pay twice as much when using a credit card to make a payment. This excess spending can land you in a debt.
How can you avoid this?
In order to be able to to avoid falling into debt, you need to be able to control your spending by setting a spending limit on your credit card. Even if your card is below your credit limit, based on how much you can afford to pay on your credit card each month.
Just try to make sure you avoid living an extravagant lifestyle from the money you get from a credit card.
Credit Card Can Put You At a Risk Of Ruining Your Credit Score.
When using a credit card, can impose a serious risk on your credit score as a result of the inability to pay off your debt for 30 days or more. If for any reason you’re unable to clear the outstanding debt on your card, your credit score will fall which can hinder you from enjoying other future benefits that need a good credit score.
How can you avoid this?
The best way to avoid harming your credit score is to ensure you pay off your credit on time, keep your balance below 30% of your credit limit, and minimize the credit card applications you make.
Difficulty in Tracking Spendings Across Multiple Credit Cards
For you to be able to keep proper track of your spending all the time is a healthy way of creating stable finance. But when you include a credit card in your usual spending can make it difficult to keep a proper record of your spending, especially if you’re using your credit cards along with cash and debit cards and if you’re using multiple credit cards. That is one of the reasons credit cards make it so easy to overspend.
How can you avoid this?
To keep a proper record of your spending, you can use other digital personal finance software such as Mint or Quicken to keep a proper record of your finance.
If you’re an analog type of person who prefers to keep records in a written way, then you can make use of journals or spreadsheets.
There are other dangers of using a credit card, but the ones we mentioned above are the major dangers of using a credit card.
Conclusion
This article is not meant to discourage you from getting a credit card, but to show you the dangers and risks attached to getting a credit card.
If you find this article helpful, don’t forget to share. This will encourage us to write more informative articles like this.
For any questions or inquiries, you can drop them in the comment section. I’ll try to respond to them as fast as i can.
