These days a lot of people are starting depending on credit cards for keeping up with various kinds of payments. But many of them cannot fathom the fact that credit cards have its own set of disadvantages, which can have a severe impact on one’s finances, if credit cards are not used properly. Here is a list of the few disadvantages of credit cards that should not be ignored.
High Interest Rates
Most of the credit card providers tend to charge exorbitant interest rates which acts as a very big drawback for the users of credit cards. As per statistics, the interest rates for credit cards are much higher than the conventional loans from the bank. There are several credit card providers who around fifteen percent as interest if the monthly bills are not cleared fully by the due date. It is through the interest rates, the bank and various credit card providers earn their profits. Therefore one needs to check the interest rates on the credit cards, while applying for it.
It is not uncommon for people to overspend when they have the power of credit cards. People fail to stick to a budget when they have credit cards as they tend to go overboard with their expenses. It is quite easy to get tempted to use a credit card to the hilt, as one does not need to pay the amount immediately. The balance in your saving bank account might not permit you to overspend, but a credit card allows that kind of a facility. Many people use their credit cards till they reach its credit limit. In most of the cases the repayment capacity of a consumer is not equal to the credit limit on credit cards, and due which one faces financial crunches. People feel that they are not paying for their purchases as they just have to put their signature on the bills and voila the purchase gets completed. Credit card providers are making profits as most people often are not strong enough to get a control over temptation.
Roll Over Balances
Rollover balances are some of the most sought after features of credit cards. This facility allows customers to carry over the unpaid balances to the next month. Many times people fail to make payments on time simply because their expenses exceed the income and there is no way to fill the void. Due to the roll over balances phenomenon many people end up paying a very high rate of interest for their credit card payments. Since the credit card bills have just arrived once a month, many of us tend to lose track of the purchases that have been made. And when the credit card bill arrives then it flabbergasts many people when they see the actual number of purchases that has been done just within the time frame of one month. Credit card providers give the option of paying just a minimum amount every month, and this offer is lapped up by innocent customers. The payment of minimum amount is a trick which is used by every credit card company, in order to increase the amount of interest for its customers. People basically think that they are taking care of their debt effectively when they pay just the minimum amount but it’s a myth which needs to be dispelled to avoid the credit card debt cycle. When people just keep on paying the minimum amount then the actual balance tends to increase at an exponential rate, and it can become difficult to manage the debt later on.
Credit card frauds have been known to cause a lot of misery to people. Theft of credit cards is the most common discomfort that can be caused by credit cards. Due to the advent of technology, it has become easy to tamper with credit cards to make fraudulent transactions. This one does not need to lose his credit card in order to get subjected to frauds as credit card details can be procured from various dubious sources. Most of the times, people do not realize that there has been any fraud till the moment they see their monthly credit card statement. Since there are various disadvantages of credit cards, one needs extremely careful with its usage.