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Advantages and Disadvantages of Credit Cards

Once upon a time, our ancestors paid in livestock for a sack of flour. That livestock turned into shells which turned into precious stones and metals eventually leading to paper currency. It was a revolutionary change to the outdated methods for it let people assign a monetary value to the commodities they exchanged.

Then came 1958 and the world was introduced to credit cards, a hassle-free way to transact on the go!

As the name suggests, this plastic currency helps you transact on credit basis. The card’s limit for spending is set by the bank issuing the credit card and the credit card bills are to be paid at the end of the month.

If you are someone who is new to the world of credit cards and have their doubts regarding the plastic currency then take a look at the advantages and disadvantages below.


  • Building up your Credit History: It is the easiest way for a person to build up a history of good credit behavior based on which his/her credit score will be assigned.
  • EMI Facility: At the time of making a large payment, you might not want to cut a deep hole in your savings account but you can choose to put it on your credit card as a way of deferring payment. You can also choose to pay in EMIs to avoid lump sum payments.
  • Safeguarding your transactions: Credit card has various safety features to safeguard the cardholder from credit card fraud, theft or loss.
  • Rewards: Many banks issuing credit cards to its customers also give various offers and rewards on the usage of these cards!
  • Track your expenses: Transacting with a credit card helps you keep a track of your expenses through a detailed list sent with your monthly credit card statement. This can be useful while drawing a budget for yourself, cutting back expenditure or for tax purposes.
  • 0% interest: Credit cards provide with Interest-free grace periods for the repayment.


  • High Interest rate: If you do not pay your share on the billing due date, the amount is carried forward and the interest is charged on that amount.
  • Credit card frauds: If you are not careful with your account details or save your card details on websites that aren’t secure, you may fall victim to fraud. With the advancement of technology, it is possible to make a clone of your card, gain access to confidential information and make purchases.
  • Hidden costs: Credit cards may appear simple and convenient but there are many hidden expenses attached to it. Credit cards have a number of taxes and fees, such as late payment fees, joining fees, renewal fees and processing fees.

In the case of card fraud, the bank usually waives of the charges if the crime is proven. This means that you don’t have to pay for the purchases made by the thief.

  • Convenience of overspending: It can be tempting to make all payments through credit card, leaving your bank account untouched. But this can lead to owing more than you can pay back to the bank.
  • Impact on the credit score: Non-payment of credit card bills leads to a reduction in your credit score.

For every financial product you choose, it is very important for you to assess its pros and cons to make an informed decision.

Make sure the product you choose match your needs and requirements.


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