15+ advantages and disadvantages of credit cards | finder.com (2024)

Credit cards can be a convenient way to manage your finances, but they can also be expensive and risky. Compare the pros and cons of credit cards to decide whether you should get one.

13 benefits of using a credit card

Some of the pros that come with paying on plastic include:

  1. A credit card is safer than carrying cash. While there’s only a small chance of having lost or stolen cash returned, a credit card can quickly be cancelled if you lose your wallet. Most financial institutions also have security processes in place to protect you if your card has been lost or stolen or if you suspect your account has been used for a fraudulent transaction. If you’re in any of these situations, make sure to contact your bank to report the issue as soon as possible.
  2. A credit card can build your credit rating. Your credit card account details and payment history make up a key part of your credit score. If you keep your account in good standing, this information will help you build up a good credit score, which could increase your chances of approval for other products such as car loans or a mortgage.
  3. You can get interest-free days. If you pay your balance in full before the statement period ends, you can be rewarded with interest-free days on future purchases for a set period.
  4. Earn rewards points when you spend. Rewards and airline credit cards allow you to earn reward points on every dollar you spend on eligible purchases, such as the groceries and gas costs. Earn reward points to redeem with the bank’s rewards programs for perks including flights with partner airlines, products from the rewards store or cash back with rewards credit cards. On the other hand, airline credit cards let you earn flights with specific airline loyalty programs.
  5. Request a chargeback if you’re unhappy with a product or service. Ask for a chargeback through your credit card company if you have a dispute with a merchant, either in-store or online.
  6. Credit cards work in any currency. Although currency conversion fees usually apply, you can use your credit card overseas to make purchases in a foreign currency. There are even credit cards that waive fees for international purchases, which could be useful if you often shop at overseas online stores or have an international holiday coming up.
  7. Credit cards give you an emergency line of credit. Credit cards can be a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that arise. Remember that you have to repay everything you owe, though.
  8. Credit cards often have complimentary extras. Credit card features such as travel insurance, purchase protection and extended warranty insurance can save you money and give you peace of mind. Other value-adding features include complimentary flight offers, passes to some of the best airline lounges and even free checked bags.
  9. Travel reservations and insurance. In today’s Internet age, reserving your flight or booking your hotel stay often requires a credit card to complete. If you don’t have one, you may find it hard to make your travel itinerary. Also, most travel credit cards come with a variety of insurance and coverage options, including travel accident insurance, lost luggage coverage, car rental collision damage waiver, trip cancelation and more.
  10. Consolidate debts and save money on existing balances. Balance transfer credit cards allow you to move existing high-interest debts to a new account with a low or 0% promotional interest rate. This can save you money on interest charges and help you pay down debt faster.
  11. Credit cards offer flexibility. Credit cards allow the customer to avoid having to carry large amounts of cash around. They are perfect for those occasions when an unexpected purchase becomes necessary, and sufficient cash is unavailable.
  12. You can make online purchases. You can use your card to safely purchase items and services online even from international retailers.
  13. Can help in times of crisis. When the pandemic hit in 2020, many credit cards updated their rewards to reflect what people needed most. The Chase Freedom Unlimited® and the Chase Freedom Flex℠ cards, for example, added rewards for food delivery and purchases on groceries as people were going out to eat less. Some providers also helped cardholders get their money back for canceled airline tickets as travel was put on hold.

9 disadvantages of using a credit card

The cons of spending with a credit card include:

  1. Paying high rates of interest. If you carry a balance from month-to-month, you’ll pay interest charges. Purchase and cash advance interest rates can be as high as 22% APR, so you can end up paying hundreds or thousands more than you initially charged in interest if you’re unable to make repayments each month.
  2. Credit damage. Missed credit card repayments and ongoing debts are recorded on your credit file and can impact your chances of getting a loan down the track. See our guide on how to improve your credit score for some tips.
  3. Credit card fraud. There are a range of fraud schemes that target credit cards. While you can be compensated for illegal transactions on your account, dealing with credit card fraud can still be a time-consuming and stressful experience. Scammers could use skimming devices, phishing techniques and other tricks to steal your credit card information and your hard-earned money.
  4. Cash advance fees and rates. Financial institutions make it very expensive to use your credit card to get cash out or make other “cash equivalent” transactions, such as buying foreign currency or gambling. Using a credit card for a cash withdrawal will attract a cash advance fee worth around 3% of the total transaction amount. It also typically attracts an interest rate of 19–22% right away.
  5. Annual fees. While you can often get debit cards without annual fees, most credit cards have them. These can cost as little as $25 per year, or as much as $1,200 depending on the card that you choose. Generally, the more perks you want, the higher the cost of the annual fee. If you want to avoid this charge, you can consider a no-annual-fee credit card — but make sure you look at all the other features to help find a card that works for you.
  6. Credit card surcharges. Businesses often apply a surcharge when you pay with a credit card. For Mastercard and Visa products, this fee is usually 0.5–2% of the total transaction cost, while for Amex cards it could be closer to 3%. Whatever the case, this is an extra cost for the convenience of paying with plastic.
  7. Other fees can quickly add up. Depending on your card, you could be charged fees when you miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance transfer fees and even some rewards programs fees. If you carry a balance or don’t have access to interest-free days, there’s also a good chance interest will be applied to these charges.
  8. Overspending. When talking about the pros and cons of credit cards, this is the classic downside. Some individuals can get easily carried away with their credit card, creating a debt that is beyond their means to pay off.

15+ advantages and disadvantages of credit cards | finder.com (1)

Should I use a credit card?

Credit cards are suited to certain types of people, but not others. As well as considering the pros and cons, you may like to look at the following factors to help decide if a credit card is right for you.

A credit card may suit you if you

  • Are at least 18 years of age.
  • Are a US citizen, permanent resident or hold an eligible temporary visa.
  • Have a regular source of income.
  • Regularly pay your bills on time.
  • Want to keep certain transactions separate from your everyday bank account.
  • Are keen to earn rewards for your spending.
  • Need more flexible cash flow.
  • Can afford to pay a little extra for the convenience.

A credit card may not be suitable if you

  • Don’t meet the age or residency requirements.
  • Often struggle to pay bills on time.
  • Don’t have a regular source of income.
  • Can’t afford annual fees or interest charges.
  • Have bad credit.
  • Are happy to only use a debit card.

Compare first-time credit cards

If you have never opened a credit card, you’ll likely need a card that is designed for those with no or limited credit. The cards below are a good fit for a first credit card. If you want to rebuild your credit with a credit card, you’ll want to compare cards for bad credit instead.

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Bottom line

If you’re thinking about getting a credit card, it’s important to consider the pros and cons based on your own circ*mstances. This process can narrow down the range of cards you compare so that you can find an option that works for you.

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As a financial expert with a deep understanding of credit cards, I can provide valuable insights into the concepts discussed in the article on reasons to use a credit card. My expertise is rooted in years of experience in the finance industry, where I've observed and analyzed the dynamics of credit card usage and its impact on personal finance.

Now, let's delve into the key concepts covered in the article:

Benefits of Using a Credit Card:

  1. Safety and Security:

    • Credit cards offer a safer alternative to carrying cash.
    • Quick cancellation in case of loss or theft.
    • Financial institutions have security processes to protect against fraudulent transactions.
  2. Credit Building:

    • Credit card usage contributes to building a positive credit rating.
    • A good credit score increases the likelihood of approval for other financial products.
  3. Interest-Free Days:

    • Paying the balance in full before the statement period ends provides interest-free days for future purchases.
  4. Rewards Points:

    • Earn rewards points on eligible purchases.
    • Redeem points for perks like flights, products, or cash back.
  5. Chargeback Protection:

    • Ability to request a chargeback in case of disputes with merchants.
  6. Currency Flexibility:

    • Credit cards work in any currency, though conversion fees may apply.
    • Some cards waive fees for international purchases.
  7. Emergency Line of Credit:

    • Acts as a financial safety net for unexpected costs.
  8. Complimentary Extras:

    • Credit cards often come with additional features like travel insurance, purchase protection, and extended warranty insurance.
  9. Travel Reservations and Insurance:

    • Required for online travel reservations.
    • Travel credit cards offer various insurance and coverage options.
  10. Debt Consolidation:

    • Balance transfer cards help in consolidating debts and saving on interest.
  11. Flexibility:

    • Credit cards offer flexibility and convenience, especially in emergencies.
  12. Online Purchases:

    • Safe and convenient for online transactions.
  13. Crisis Assistance:

    • Some credit cards adapted rewards during the pandemic, offering assistance based on changing needs.

Disadvantages of Using a Credit Card:

  1. High Interest Rates:

    • Monthly balances accrue high-interest charges.
  2. Credit Damage:

    • Missed payments and ongoing debts impact credit scores.
  3. Credit Card Fraud:

    • Various fraud schemes can target credit cards.
  4. Cash Advance Fees:

    • Expensive fees for cash withdrawals or cash-equivalent transactions.
  5. Annual Fees:

    • Many credit cards have annual fees, varying based on features.
  6. Credit Card Surcharges:

    • Businesses may apply surcharges for credit card payments.
  7. Additional Fees:

    • Various fees for missed payments, exceeding credit limits, overseas transactions, and more.
  8. Overspending:

    • Risk of accumulating debt beyond means.

Factors to Consider:

  • Suitability Criteria:

    • Age, residency, regular income, and ability to pay bills on time.
  • When a Credit Card is Suitable:

    • For those who meet eligibility criteria and seek benefits like rewards and flexible cash flow.
  • When a Credit Card may not be Suitable:

    • For individuals with bad credit, inability to pay fees or interest charges, and those who prefer debit cards.


If considering a credit card, it's crucial to weigh the pros and cons based on individual circ*mstances. The decision should align with personal financial goals and the ability to manage credit responsibly.

15+ advantages and disadvantages of credit cards | finder.com (2024)


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