Credit Cards: Friends or Foe

In today's world, the "Plastic Money" or Credit Cards have replaced paper money substantially. It is easy to carry, safe and convenient way of use has gained popularity. With multiple financial groups and organizations coming up with their value added debt packages with their credit card services in this competitive market it has become very difficult for the consumer to opt for the right and optimized package. The major drawback of using credit cards is that too many people incur debts on their cards, which is beyond their limits to repay. Current credit card debt totals about $360 billion. Anyone who is using a credit card should be aware of the schemes that he or she has opted for and maintain a detailed record of all the transactions. Credit cards prime need is for meeting the emergency needs of the common person but used very frequently by other individuals for other purposes due to their secure and convenient mode of transaction than cash transactions.

Depending on your terms and conditions, the credit card gives purchase protection, travel insurance, frequent-flier miles, or cash-back bonuses. However, interest and fees may outweigh the financial benefits of frequent flier benefits and other benefits. Credit cards are often the only way of making hotel, airline or rental car reservations. Online shopping portals like eBay gives the easy and convenient method of online transactions through credit cards. The advantage of this feature can become a disadvantage if not used wisely. Spending money, which does not exist, tends to become a bad debt if limit of spending is not limited to the source of income. Credit cards, utilized properly can produce long-term benefits. Using credit for emergencies or when cash is hard to find can help maintain credit card debt. Paying bills at regular intervals can also keep a check on your credit card account.

Most credit cards have interest rates between 13.5 percent and 21 percent. Paying that kind of interest, except in extreme cases, is not a viable option. Also opting for multiple credit cards from different financial organizations is not a good option since it increases the risk of more and more outstanding debt for an individual. Credit cards are a hassle free method of payment for online or phone shopping or sometimes the only way. The serious problem of identity theft through a credit card is also a major concern for an individual. Report the loss of a credit card to the concerned authorities else, one may have to pay a debt, which does not belong to the particular individual. The argument will continue over the benefits and issues of use of a credit card. Its salient features have made our life easy at times and convenient. The smart "Plastic Money" has replaced time consuming and risk prone use of currency. However, everything has a price and so does credit cards with their high interest rates and fees. Using it wisely can make life easy and hassle free and using it unwisely can be disastrous.