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How to make wise decision before using credit card

FINANCIAL STANDARD
By Standard Reporter | March 10th 2015

NAIROBI, KENYA: Making a purchase with a credit card can be rewarding one moment and regrettable and binding the next. For many, the joy of that tiny square of plastic monetary freedom becomes a ball-and-chain of debt faster . Yet others maintain a responsible, reliable account that provides a rewarding experience.

Take a look at the following pros and cons for credit cards to decide whether or not you should make the swipe.

Credit Card Pros

Convenience.

Credit cards wouldn’t be nearly as popular as they are today if they weren’t so maddeningly convenient. Paying at the store, at the pump, or at the ballgame is significantly easier with a piece of plastic that takes no immediate bite out of one’s pocketbook.

The fact that most major stores (and most minor ones) accept various cards only adds to the handiness of carrying around a credit card.

Rewards.

One of the greatest parts to credit cards is reaping the rewards for your spending habits.

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Depending on your card, the rewards can vary, but the good news is that there is such a wide variety of options that you are bound to be able to find the right card to fit your lifestyle. There are cards that offer plane tickets, sports merchandise, and good old-fashioned cash. Others build up a stockpile of points for cardholders to use to get whatever their hearts desire.

Building credit.

Using a credit card—and using it responsibly—can help build one’s credit score, which could mean a better shot at a loan or a better mortgage down the road.

The key part to using a credit card to build credit is keeping up with payments. Having a credit card does no good if you fall behind on payments. Acting responsibly on your account, however, will help you build a credit score that reflects dependability and accountability.

Credit Card Cons

Late payments.

By far, the most dangerous part of credit cards is not paying them off on time, and for many, this problem is a constant temptation despite its obvious negative consequences.

Once you fall behind by one payment, the climb back to a debt-free account becomes harder and harder. Late fees, interest, and penalties build faster than you would believe, and you may find yourself making monthly payments that only cover your charges and don’t even touch your principal purchases.

Hidden fees.

Many times, credit card companies will say or do whatever it takes to get you to sign your name on their application. Of course, once that ink has dried, they’ll suddenly remember to tell you about start-up fees and processing fees that you never saw coming.

Always check the fine print of a contract before you sign and ask if there are any extra fees.

Over-spending.

One of the most overlooked negative aspects to credit cards is the ease with which cardholders overspend. Really, the psychology behind this is simple. You purchase items without ever exchanging actual money, so you hardly feel like you’re paying anything at all.

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