The Pros And Cons Of Credit Cards

These days it seems plastic is king. With products like ApplePay, Google Pay, Zelle, Venmo, and CashApp it is fast and convenient to move (and spend) money without ever touching actual cash or change. Consumers in the US have become more reliant on plastic, in particular credit cards. A study from September 2020 shows that 70 percent of Americans currently have a credit card. The same study shows there are 1.06 Billion credit cards currently in use nationwide, an amazing statistic.

But when it comes to using a credit card, most people fall into two categories: using the card for everything or using the card for nothing. As with most things in life, balance is important. If you’re using a credit card for everything, you can land yourself in a revolving credit nightmare with an increased chance you won’t be able to meet all of your monthly bills. If you have credit cards but don’t use them, you run the risk of having no benefit to your credit score in the end.

A good credit history (and score) is dependent on the responsible use of revolving credit. To get the most benefit, use your revolving charge accounts regularly and pay off most (but not all) of the balance every month. If you’re looking to build your credit score, it’s important you leave some balance on the card.

A woman using a laptop with a credit card in her hand.

Many credit cards offer rewards like points, cash back, or discounts when you use them, making them more enticing. But those rewards come with a price – an interest charge when you don’t pay the card off in full each month.

So, should you use your card for everyday expenses or not? Here are some pros and cons:

Pros

  • Card Rewards – We’ve mentioned them already, but let’s think about this some more. If you’re going to have to buy gas or groceries or other regular expenses anyway, you may as well get some points or cash back, right? You’ve hopefully already budgeted for these items and can easily use a credit card and then pay it off immediately, so go for it and enjoy those perks!
  • Credit History – Using your cards regularly and then paying them off helps to boost your credit score. It shows you’re a responsible borrower and you know how to handle your money. If you’re getting ready to apply for a loan, this can help.
  • Auto Payments – When you set up auto payments on your credit card for your fixed monthly bills, you are less likely to be late or miss a payment (read our blog for some tips on buying a car on a budget)

Cons

  • Overspending – Using a credit card for everything can make it harder to keep track of your expenses and stick to your budget.
  • Debt – This is an extension of the last point. If you routinely spend more than you plan to, you may find yourself unable to pay the balance off in full each month. When that happens, debt can grow.
  • Interest – Borrowing money isn’t free. If you carry a balance, even a small one, interest will get charged. That means you’ll end up spending more than you think on those every day purchases and you’ll negate the points and rewards you earned by using the card in the first place.

The bottom line is credit cards are a wonderful tool if you have the discipline to use them properly. Though you may have periods where you have to spend more, if you can get right back on track as soon as possible, you’ll get the benefits of building a strong credit history.