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No doubt credit is helpful in supporting your purchases when you are out of cash or can’t afford to pay for the purchase in one go. But every coin has two faces; getting money on credit is helpful and advantageous, but it has certain drawbacks too. Let’s compare the pros and cons of borrowing credit.
Let’s look at the positive side, the benefits of credit, first. The most attractive advantage of credit is that you can spend whenever and wherever you want, even if you are not having money on hand. It supports your purchases ranging from buying chocolates to air ticket. Credit is helpful when you plan to buy a new dwelling or a private car, commercial loans can help you to start a new business.
Another plus is that you need not worry about safety of carrying credit. They grant you convenience of carrying a large amount at any place. If you had to carry same amount of cash, situation had been a lot different. This is one of the major reason people like credit.
Though car and home loans are intended only for purchase of a vehicle or house respectively; but you can intelligently use that credit for some other purchase like modification of your home, funding your family vacation or clearing your previous high interest debt.
Some people are into businesses that promise handsome income but it is not steady. This means if you are earning 1000$ a month, it is not necessary that you will earn the same next month also. Credit helps in coping up with these ups and downs in income, as you can spend on your needs and pay for it later when you have your pocket full.
Any number of advantages cannot overshadow the drawbacks of credit. Though it is safer to carry and one can use it even when cash is not available but you cannot deny the fact that credit supports over expenditure. A credit card of limit $10,000 in your pocket is similar to have same amount of cash with you. And with this much of cash, you simply cannot resist yourself from shopping. For people who possess more than one credit card, story doesn’t end here. They keep purchasing and when one credit card limits out they start swapping the other one. In the end when they are blown away by the credit card bills, they regret for the useless expenditure.
Credit is a benefit for you if you are of the mentality that you should not line up your bill, i.e. clear them regularly and in time. Otherwise, credit also becomes an expense because after the no interest period is over, you are charged some interest on your balance which keeps on growing with time.
Perhaps you may not have read the credit card agreement carefully, which states that your creditor can change your credit limit and interest rate anytime. All he has to do is to notify you for the same in written. This is the major disadvantage of credit. Changes in interest rates mark you as a risky borrower. However this happens mostly due to late or defaulted repayment. This is reflected in your credit report which harms your credit score .
Thus wise use of credit is necessary; otherwise instead of being a support it becomes a trouble.
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