Like most things, there are advantages and disadvantages to credit cards. Knowing some of these can help you decide if you do or do not want to use credit cards.
Advantages
Buy goods now, pay later - If you pay off the full balance at the end of the month then you’ve earned ‘free’ money for anywhere up to 2 months depending on your grace period and when the purchase was made. If you want to buy something expensive like a new sofa or double bed then it’s often a good strategy to time your purchases so you get the maximum amount of grace between when you purchase it and when you have to settle the bill with the credit card company. This strategy also works beautifully if you put your purchases on one credit card and then move the debit balance to another card that offers a 0% interest on balances for x number of months.
Advantages of using business credit cards
Building a Credit Line - Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications. Having a credit card and using it wisely will help you build a good credit history.
Credit Card Benefits - In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance.)
Purchase Protection - Buy some faulty goods with your credit card and they’ll normally be 100% insured for a month or two. Insurance also in many cases covers loss, so if you buy a new watch and lose it on the way home the insurance will cover it.
Disadvantages
Blowing your budget - The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. While this may seem like 'free money' at the time, you will have to pay it off and the longer you wait, the more money you will owe since credit card companies charge you interest each month on the money you have borrowed.
Credit Card Fraud - Like cash, sometimes credit cards can be stolen. They may be physically stolen (if you lose your wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a web site) and use your card to rack up debts.
Credit cards can make life easier and be a great tool, but if they aren't used wisely they can become a huge financial burden.
