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Learn all about the disadvantages of using credit cards

BY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-10-12

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   David Prakash Kumar
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Credit cards are always thought to be a very helpful asset. People are wonder struck by the fact that they are able to purchase many kinds of things without even having any money in their wallet. Credit cards have great purchasing power and this is truly an advantage. Is this advantage so great to mask the fact that people end up paying a lot more than they bargained for? This article provides a list of the disadvantages of using credit cards.
The various disadvantages of using credit cards are:

1. Very high interest rate:

The high interest rate on the credit is one of the most important disadvantages of using credit cards. There are various reasons for the interest rates charged being huge in spite of the fact that you never noticed that they were high before purchasing the credit card. The first reason is that the credit card rates that are usually advertised are all monthly rates and when it is calculated for one whole year, it works out to be a huge amount. This is the reason why people are usually asked to clear all their credit card debts. Some people even advise to break your fixed deposits to pay off the credit card dues, as the interest is so high.

2. Fraud:

Credit card fraud is on the rise around the world. Smart cards need to be devised that can try to prevent credit card fraud. Many people have lost thousands when their credit cards were stolen and used to purchase various things. It may be easy to trace the purchase, but by the time the trace is done, the fraudster is long gone and the trail is cold. Skimming is another method by which the data on the card is read on a skimmer that is in turn used to commit fraud.

3. Buying beyond limit:

When you have purchasing power, you also need will power to prevent you from purchasing. If you have huge purchasing power, but low will power, then you will end up spending huge amounts. This can in turn cause your budget to be tossed aside. This is one of the reasons for many young people to be neck deep in debt. They purchase beyond their limits and then end up paying a lot of money as interest.

4. Internet fraud:

There are many utility and other payments that are done these days with the use of credit cards. The main disadvantage of this method of online payment by credit card is that unless the company is very good and has fail safe mechanisms, it is very easy for hackers to retrieve the information about your credit card and use them for their own benefit.

5. Due for payment:

Another important disadvantage of credit card usage is that the last date for payment of dues and interests is very important. If one is unable to pay on or before the day, then a huge amount is charged that can lead the person further into debt.

These are some of the most important disadvantages of using credit cards. A person who has a credit card should weigh the result of credit card use and lack of its use. Then the cheapest and most comfortable option should be taken.

Article Source: http://www.saching.com

About Author / Additional Info: I am a physiotherapist and also a freelance writer. I have been writing for many blogs and websites and also take up freelance assignments. Comments are welcome at prakashdavid@rediffmail.com

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