Credit Cards - the Good and the Bad

​There are both advantages and disadvantages to using credit cards. The topic continues to be one of the most debated issues of our time. It seems that the parties are polarized into loving or hating them. When used correctly, they are great and can provide you with everything from free overseas travel and accommodation, to insurance and improved cashflow planning, however when misused, can lead to a bottomless empty feeling and debt.
10 benefits of using credit cards include:

1. Rewards programs that can earn you everything from flights to electrical goods, accommodation and gift cards, depending on the card. 
2. Frequent flyer miles continue to be one of the most utilized methods of redeeming points and according to the card and program can be a way for families to finance holidays both domestic and overseas. I have used this myself, and have had several flights. Frequent Flyer points do not convert well to product or gift cards, as too many points are required compared to flights.
3. Signup bonuses. Many premium cards today offer large amounts of points, free flights, lounge entries, for just signing up and spending a particular amount. Read the fine print.
4. Complimentary travel insurance. Most cards now offer this feature some include rental car insurance as well, however this needs to be checked. This is a big drawcard according to Canstar.
5. Price protection insurance and purchase protection insurance. Price protection means that if you can show proof that the price dropped on your purchase they will pay the difference. Purchase Protection cover new items that you buy against accidental damage and theft for a set period of time.
6. Fraud Protection – a very common occurrence today, and it is reassuring to know that the majority of cards have full protection.
7. Convenient and safe online shopping. Easy to use, and a great time saver. Some say much better than using cash to pay, especially Gen Y’s. Credit card safety extends to lost or stolen cards that can be cancelled and replaced with no personal loss. Lost cash is just lost. You can carefully track your spending. 
8. Works in any currency. There is a small exchange cost / transaction cost, however is still reasonable.  
9. Widely accepted around the world.
10. Interest free days. With most cards offering up to 55 days interest free days all you need do is pay off the previous months balance. If you are able pay the account off each month it is a free short-term loan.

7 real costs of using credit cards:
You tend to overspend. If you have ever struggled with credit card debt, it is best to avoid using credit cards completely. I challenge anyone to see if their spending pattern is altered by paying cash only instead using a credit card.

1. History in our society says we spend more often and larger amounts on cards than when we pay with cash.
2. Anyone who is living paycheck to paycheck, is advised to avoid credit cards completely. It most likely is contributing to overspending for purchases you can’t really afford.
3. Whether you have a low interest card or a high points black / platinum card all interest is a waste of hard-earned money.
4. Credit card debt can be the cause of seriously debilitating debt that can set you back financially for years.
5. The fees on most cards are high, including annual fees, balance transfer fees, cash advance fees, foreign transaction fees, late payment fees, over limit fees to name a few. These costs are on top of any interest you may be paying. While some fees don’t apply to every card, these fees still cost a substantial amount each year and need to be considered in any decision.
6. Chasing points while carrying a high credit card debt is illogical, as the interest cost is higher than the value of the points earned.
7. It is very difficult to climb out of the debt trap when you have multiple number of credit cards and all cards are being used, each month. Without a real plan, it is extremely difficult to get back on track with debt under control.

Thoughts:
Limit the number of credit cards to 2 – one for business and one personal card. Then you can pay out the full balance each and every month.
Track your credit card balance even during the month.
Know your personal safe limit – not the credit card limit, but the amount you know you can pay off in full each month.
Never carry forward a balance from the previous month.
The credit card itself is neither good nor bad. It is always how the user handles the credit card that determines whether the card is good or evil for the individual. So you need to be extremely honest with yourself, and decide which fence you are sitting on.



PS: For a free copy of “How to Pay Off Credit Cards” please email me. If this is something you would like to gift to one of your friends or relatives, please email me their details for this free report.
PPS: If you would prefer to be personally coached, or know somebody who needs coaching on credit card debt, I am available to guide and teach and help.

---