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Published September 19, 2023
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Pros and cons of using credit cards

Whether shopping in-store or online, know the pros and cons of using credit cards to benefit from fraud protection and other perks.

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Credit cards are an essential financial tool in today’s digital economy, which can be highly beneficial when used correctly and dangerous when misused. Before you get your first card, you should also know the pros and cons of using credit cards.

🤓 Nerdy Tip

Many of the pros and cons of credit cards also apply to debit cards, which perform the same functions as a credit card — but only if you have sufficient money in your bank account to pay for a particular item. Debit cards carry less of the risks involved with credit cards, too.

Pros of credit cards 


You can use a credit card to buy virtually anything from groceries, petrol, clothing, travel, dining, bills, loans and investments to some types of government services, medical care, tax, rent and many other things. You can even purchase a car with some cards. The only genuine restrictions are the type of card you have and its credit limit. 

Making reservations

One major advantage of credit cards is the ability to reserve concert tickets and book flights. You can simply go online and fill out an application in minutes or less rather than queuing outside a store or being on hold on the phone for an extended period, as in the past. Booking holidays with a travel credit card can earn frequent flyer points and other rewards. 

Credit building

Using a credit card is like borrowing funds to buy things. Your credit rating will improve as you continue establishing a record of paying your bills regularly without incident. A good credit score will be highly beneficial if you want to buy a house or a car in the future or get another card with better features, such as a lower interest rate and more rewards. 

Security and fraud protection

Credit cards come with many fraud detection and prevention measures these days. For instance, push notifications alert the cardholder to every transaction made, state-of-the-art PIN security, biometrics and advanced chip technology, to name a few.  

Ability to lock/block card

Locking or blocking your credit card provides another valuable layer of security, rendering the card useless to a would-be thief. Even if you’re sure you just lost your card, this feature gives you time to track it down. 


In the event of stolen cards, credit card providers and networks offer a range of insurance products, such as zero liability insurance. For example, credit insurance, where you can still pay urgent bills even if you don’t immediately have the necessary funds. They also provide comprehensive travel insurance covering lost baggage and flight cancellations. 

Purchasing power

A large credit limit gives you more purchasing power to buy an expensive item such as a television or white goods, especially if you have trouble saving money

This is, of course, a double-edged sword because it may mean going into debt over something you can’t really afford.

Interest-free periods

Credit card purchases can be made for an interest-free period, usually up to 55 days, but sometimes shorter and sometimes longer (check the terms and conditions when you apply for a card). That means if you pay the total amount on your statement each month, you can use your card without paying any interest. That allows you to enjoy all the card’s benefits, such as accruing purchase rewards. 

Interest-free periods do not apply to cash advances, which are charged interest from the moment you withdraw the money and usually attract extra fees and a higher interest rate. 

Access to instalment plans for major purchases

Credit card instalment plans work on a buy now, pay later (BNPL) basis, where you can buy a large or more expensive item and pay it back through monthly instalments. When you sign up for a plan, the bank deducts the total purchase amount from your credit limit. As you pay off the balance, the amount you repay is added back to your available funds. You should always check the terms and conditions of these arrangements to ensure you’re not paying an outlandish amount of interest on the purchase in the long run. 

» MORE: BNPL vs credit cards

Access to emergency funds

A credit card will give you access to funds that you otherwise would not have in an emergency. For example, say you have a credit limit of $5000 on your card and have no other means of getting money. Your credit card’s line of credit could pay for a medical procedure, car registration, or even the rent and groceries if need be. You could use your credit card to get emergency cash a few days before your salary lobs in your account. 

Just be aware that withdrawing cash from your credit card is considered a cash advance, and your interest rate on those transactions will likely be at least 20% or higher.

Record of payments and expenses

Credit card statements provide a comprehensive and accurate account of all your expenditures. That helps you track expenses and monthly spending to monitor your budget and easily tweak it accordingly. It should also alert you to any charges you don’t recognise that you may dispute.

Universal acceptance

Credit card networks — Visa, Mastercard, and American Express — have become ubiquitous globally, so you can use them almost anywhere, even while overseas, to pay for goods and services. Some options, like travel money cards, also work effectively across currencies. So, the need to carry traveller’s cheques or visit a money exchange to receive the correct foreign currency is long gone. You can simply withdraw the local cash from an ATM with your credit or debit card.


Your credit card provider will provide you with a monthly statement of all your transactions. If you need to dispute a transaction, you can get a chargeback to refund the purchase. That could be because you didn’t get what you paid for or the item never arrived, among other reasons.

Rewards, perks and benefits

Credit card providers offer a range of rewards and benefits on certain cards as an incentive to get you to sign up with them. These perks include points for every dollar you spend on the card, redeemable for everything from gift cards to flight upgrades. 

Just be aware that the more expensive the annual fee on the card, the greater the perks and benefits usually are. Some exclusive black or metal cards even include perks like priority seating at concerts and the use of exclusive airport lounges.

Sign-up bonuses

Card providers also offer sign-up bonuses to incentivise cardholders to jump ship. These can range from a few thousand to hundreds of thousands of frequent flyer points. Know that there are usually conditions regarding how much you spend on the card to receive the incentive. 

Cons of credit cards 

Accumulates debt

You need to use your card responsibly, or you could find yourself in a large debt, especially if you have more than one card and reach the credit limit. In this situation, you may only be able to pay off the minimum monthly amount on each card. That could lead to a ceaseless debt cycle where the interest on the principal continues to mount so that you end up paying thousands of dollars in interest on your card purchases in the long run. 

» MORE: How to get out of debt

Interest charges and fees

Interest rates on credit cards are much higher than on personal loans or mortgages and can be crippling. High rates are especially problematic with cash advances, which may charge interest above 20%. You also need to factor in credit card fees — such as an annual fee and often monthly account-keeping fees, which can add to your debt burden. 

Make sure you pay off your credit card bill in full every month whenever possible to avoid paying interest on your purchases — or at least try to minimise the impact.

Ready access to funds

Access to your credit limit has its benefits, as discussed above, especially in times of emergency. However, the temptation to overspend can always lead you to make purchases you don’t need and wouldn’t otherwise be able to afford. If you don’t have the money in an account already, you should ask yourself whether you need what you’re about to buy and if it’s worth the debt you may take on.


Credit card transactions often attract surcharges, an extra small percentage a vendor may charge for the convenience of you using a card for payment. These are generally small amounts of money in the grand scheme of things but can quickly add up if you use your card frequently. 


Credit card holders can access numerous security measures and protocols. However, there are still plenty of scams and reasons to be wary of bad actors trying to separate you from your money. You should always be vigilant in who you provide information to and avoid websites and emails that don’t look legitimate. 

Could hurt credit score

When used wisely, credit cards can help you to build a good credit rating. Still, they can also harm your credit score if you have many missing repayments, especially over several cards. One way to avoid falling into too much debt is to set your limits relatively low, even if a provider offers you a higher credit limit, to avoid getting in financially over your head. 

» MORE: 7 money management skills to master ASAP

Using credit cards responsibly 

Credit cards are a valuable tool of the utmost convenience in the digital age and are central to moving to a cashless society. They can handle most of your needs both in-store and online. 

However, credit cards also represent a line of credit, so you must use them responsibly and treat them with the utmost respect. Otherwise, you could find yourself with a large amount of unmanageable debt due to the freedom a card allows you to spend. 

Being aware of the pros and cons of credit cards can help set you on the right path to reach your financial goals.


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