Advancement in technology always leads to convenience as well as controversies. While credit cards can make life easier and be a great tool, if they aren't used wisely, they can become a huge financial burden. Credit is using tomorrow's money to pay for something we get today. The ‘Buy now, pay later’ concept sounds great to everyone but the risk and disadvantages of using credit cards cannot be underestimated.
Apparently, credit cards imply convenience. Cards are accepted almost everywhere today. With credit cards, we need not carry a large amount of cash or bring a cheque book with us when we have large purchase. It is sometimes better than cash since using a credit card allows us to buy items on the Internet which does not accept cash. It’s so much easier to buy the needed items even when we don’t have enough money!
Undoubtedly, credit cards help out in emergencies. Some emergencies, such as the urgent need of surgery caused by a car accident, are totally unexpected and we may not have prepared enough money for them. Since credit cards let us spend the ‘future money’, they can bring their usefulness into full play in such conditions. We can use them to pay for the unanticipated but important and urgent large purchase.
Occasionally, credit cards offer special benefits to attract customers. Some card owners use credit cards to pay in Pizza Hut or some other stores or companies in order to get the discounts. Some use them to get bonuses such as free airline miles, free gifts and additional benefits. These can also be deemed as a kind of advantages of using credit cards although it is obvious that they are just the tricks of credit card companies.
Unfortunately, the pros of using credit cards cannot hide the cons of it. The number of tragedies arising from bad debts has been surging over the past few years. Do you know why?
Firstly, the use of credit cards blows our budget. The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. The convenience credit cards brings provides an avenue for impulsive buying. People with credit cards usually use their future money to buy things they cannot afford at the moment, or sometimes friends or flashy advertising pressure us to buy things we know we don’t really need. When we use cash, we will think twice before purchasing because we can REALLY experience the reduction in cash. However, since credit cards are so easy to use and so readily accepted in so many places, we may not realize that we have overused them until we get shocked by the monthly bill. As a result, this will lead us to overspending.
Secondly, using credit cards makes us a debtor. Our credit line does not depend on how much money we actually have, which is how some people get into debt with credit cards. If we are unable to pay our debt, lenders can legally claim a portion of our future income. It is sad to find that each month’s salary goes to paying debts rather than improving living standard. It’s much easier to get into debt than to get out of debt. Some debtors use other credit cards to pay for the previous debt and think that the problem is solved. At the end of the day, they will know that they have locked themselves in a vicious cycle.
Thirdly, using credit cards in fact increases the cost of the purchase. Although we don’t need to pay immediately when we get the goods or service, we have to pay some days later with interest, which in turn increases the total cost of items purchased. We can’t borrow the future money at no cost, so credit card companies charge us interest each month on the money we have borrowed. Consequently, the longer we wait, the more money we will owe.
Credit cards commit our future income – will our future income be enough? We never know. It’s hard to correctly predict our income-expenditure balance and economic condition but it’s easy to get overwhelmed with credit card debt. I don’t want to lose track of how much has been spent each month and fall into the abyss of debts. Therefore, I vote for cash.