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Disadvantages of Credit Cards
The disadvantages of credit cards are usually a product of irresponsible use on behalf of the cardholder. Most of the problems stem from failure to pay bills on time or being fiscally irresponsible with their spending. If used properly, credit cards can be of great benefit as outlined in our advantages of credit cards section. They are great for earning rewards, taking out interest free loans, financing large purchases at low rates, and are also a great alternative to carrying cash. Most importantly, responsible use of credit cards is one of the best ways to build a strong credit history. However, when an individual does not make timely payments or buys things with credit that he or she has no means to pay back, the results can be less than perfect.
Just Making the Minimum Monthly Payment
If you strictly make the minimum monthly payment on a credit card balance that is not under a 0% percent introductory rate, you will get charged interest on your balance. This can result in paying way more for the things that you have initially purchased with your card in the first place -- probably more than you would have wanted to pay for them. If you find yourself in this situation where you cannot pay more than your monthly payment and interest is being charged to your account, applying for a 0% balance transfer offer will help you to catch-up.
Rate Increases for Missed Payments
If you do not pay your bills on time you may get bumped to a higher interest rate. Additionally, if you are taking advantage of a 0% rate you may lose that perk as well as forfeit any rewards that have been accrued if you have a rewards credit card.
Overspending
Some people tend to overspend with their credit cards. Many people do not use credit cards as they would cash and also don't abide by the principles of delayed gratification.
The Impacts on Physical and Emotional Health
For those who drive up too much debt, debt they cannot pay-off, the the impact may be on their emotional and physical health. Being swamped by creditors with no end in sight is not a good thing.
Damaged Credit Scores
Sometimes you need to buy something immediately but you don't have the funds available to do so. With a 0% APR credit card offer you can buy that necessary item and pay for it in, for lack of a better word, installments, during that introductory period without accruing interest. These types of credit cards can act as interest free loans and are extremely useful during the holidays.
Wants vs. Needs
There is a major difference between wants vs. needs. The mistake that some people make is that they confuse the two. If you want something and you can afford it, even if it means paying for it over time with a credit card, that isn't a bad thing especially since credit cards allow you to buy things at no interest with 0% rates. The problem can arise for some where they think they can afford something but really can't. Misusing a credit card for purchases that cannot be repaid is not a smart way to utilize them.
Cash Advances
Taking out a cash advance using a credit card will usually result in a higher interest rate being charged to the transaction. Cash advance rates are typically much higher than balance transfer or purchase go-to rates so it's important to have a quick payment plan as the interest will accrue at a much higher clip.
Failure to Make Timely Payments
Individuals who are habitually late paying their bills may have problems with credit cards from a financial standpoint. Because fees are assessed and penalty rates may kick in (which are much higher than normal rates) when late payments are made, a purchase that they could originally afford based on the pricing of their contract may become less affordable when fees and/or penalty rates are applied to their accounts.
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