ADVANTAGES

Purchase Power and Ease of Purchase - Credit cards can make it easier to buy things. If you don't like to carry large amounts of cash with you or if a company doesn't accept cash purchases (for example most airlines, hotels, and car rental agencies), putting purchases on a credit card can make buying things easier.

Protection of Purchases - Credit cards may also offer you additional protection if something you have bought is lost, damaged, or stolen. Both your credit card statement (and the credit card company) can vouch for the fact that you have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases.

Building a Credit Line - Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) will help you build a good credit history.

Emergencies - Credit cards can also be useful in times of emergency. While you should avoid spending outside your budget (or money you don't have!), sometimes emergencies (such as your car breaking down or flood or fire) may lead to a large purchase (like the need for a rental car or a motel room for several nights.)

Credit Card Benefits - In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance.) While most of these

benefits are meant to encourage you to charge more money on your credit card (remember, credit card companies start making their money when you can't afford to pay off your charges!) the benefits are real and can be helpful as long as you remember your spending limits.
DISADVANTAGES

Blowing Your Budget -- The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. Most credit cards do not require you to pay off your balance each month, so even if you only have $100, you may be able to spend up to $500 or $1,000 on your credit card. While this may seem like 'free money' at the time, you will have to pay it off -- and the longer you wait, the more money you will owe since credit card companies charge you interest each month on the money you have borrowed.

High Interest Rates and Increased Debt -- Credit card companies charge you an enormous amount of interest on each balance that you don't pay off at the end of each month. This is how they make their money and this is how most people in the United States get into debt (and even bankruptcy.) Consider this: If you have a $100 in savings, most banks will give you at the most 2.0 to 2.5% interest on your money over the course of the year. This means you earn $2.00 - $2.50 a year on your $100 savings. Most credit cards charge you up to 10 times that amount of interest on balances. This means that if you have $100 balance that you don't pay off, you will be charged 20-25% interest on that $100. This means that you owe almost $30 interest (plus the original $100) at the end of the year. A good way to look at this is in comparison to what you would earn in interest from a bank or owe in interest to a bank loan: Savings accounts may pay you around 2% interest; if you have a loan from a bank you may pay them around 10% interest (5 times as much as you earn off your savings); if you owe money to a credit card company, you may pay them around 20% interest (10 times as much as you earn off your savings.)

Credit Card Fraud - Like cash, sometimes credit cards can be stolen. They may be physically stolen (if you lose your wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a Web site) and use your card to rack up debts. The good news is that, unlike cash, if you realize your credit card or number has been stolen and you report it to your credit card company immediately, you will not be charged for any purchases that someone else has made. Even if you don't realize your credit card number has been stolen (sometimes you might not know until you receive your monthly statement), most credit card companies don't charge you or only charge a small fee, like $25 or $50, even if the thief has charged thousands of dollars to your card. There are several things you can do to prevent credit card fraud: o If you lose your card or wallet, report it to your credit card company immediately. o Don't loan your credit card to anyone and only give out your credit card information to trusted companies or Web sites. o Check your statement closely at the end of each month to make sure all charges are yours. o You can find out more about protecting your personal o information by visiting our Personal Safety course.

Advantages A credit card can: 1. Offer free use of funds, provided you always pay your balance in full, on time. 2. Be more convenient to carry than cash. 3. Help you establish a good credit history. 4. Provide a convenient payment method for purchases made on the Internet and over the telephone. 5. Give you incentives, such as reward points, that you can redeem. Disadvantages On the other hand, credit cards can: 1. Cost much more than other forms of credit, such as a line of credit or a personal loan, if you don't pay on time. 2. Damage your credit rating if your payments are late;

3. Allow you to build up more debt than you can handle; 4. Have complicated terms and conditions; Advantages: 1. They allow you to make purchases on credit without carrying around a lot of cash. This allows you a lot of flexibility. 1. They allow accurate record-keeping by consolidating purchases into a single statement. 1. They allow convenient remote purchasing - ordering/shopping online or by phone. They allow you to pay for large purchases in small, monthly installments. 1. Under certain circumstances, they allow you to withhold payment for merchandise which proves defective. 1. They are cheaper for short-term borrowing - interest is only paid on the remaining debt, not the full loan amount. 1. Many cards offer additional benefits such as additional insurance cover on purchases, cash back, air miles and discounts on holidays.

Disadvantages: 1. You may become an impulsive buyer and tend to overspend because of the ease of using credit cards. Cards can encourage the purchasing of goods and services you cannot really afford. 2. Credit cards are a relatively expensive way of obtaining credit if you don't use them carefully, especially because of the high interest rates and other costs. 3. Lost or stolen cards may result in some unwanted expense and inconvenience. 4. The use of a large number of credit cards can get you even further into debt. 5. Using a credit card, especially remotely, introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card. Fraudulent or unauthorized charges may take months to dispute, investigate, and resolve.

Advantages:

Free, short-term credit - as long as you always pay your balance in full by the due date shown on your statement. Credit cards offer a safe and convenient way to pay for goods and services both in the UK and abroad, particularly if you are purchasing over the internet, phone or by mail order.

Purchase protection - under Section 75 of the 1974 Consumer Credit Act card issuers and retailers take joint responsibility for faulty purchases, If you pay for something with a credit card, valued between 100 and 30,000, that turns out to be faulty or which you do not receive because the company goes bust, you can claim a refund from the card provider. Protection against fraud if you are the innocent victim of fraud you will not be expected to pay if a criminal uses your card. Incentives for using a card such as loyalty points and cash back, or payments to support a charity. A truly global currency, as credit cards are accepted in virtually every country around the world.

Credit cards offer a convenient and secure payment method as well as a flexible borrowing facility Disadvantages:

You will incur interest if you are unable to repay your balance in full every month. Interest rates vary significantly so if you cant afford to clear your debt you should look for a card that offers a competitive rate of interest. The amount you can spend on a credit card is capped so you may not have access to as much money as you expected. Limits of between 300 and 500 are common for those who have never had access to credit before, while those with a good history who have shown that they use cards responsibly are likely to be offered a higher credit limit. That said, because of the credit crunch and rising levels of bad debt, providers are now more cautious about the amount they will lend. So even if you have a good track record with managing credit, you may be offered a significantly lower limit if you apply for a new card.

Advantages of credit card Advertisement Unlike carrying a briefcase full of cash in order to make the payments of capital goods purchased like car, home theater, TV, refrigerator, jewelries, computer or domestic appliance-the credit card makes all types of payments of goods and services with in a few seconds. The credit card lessens the burden of receipts of purchased goods as well, for it feeds complete information of the purchased goods, guarantee, warranty, payment, etc, which proves to be of a great advantages in case there emerges a need of repairing of the respective domestic item within guarantee/warranty period. The credit card furnishes the info of the date of purchasing, serial number, secret code, etc. A credit card paves the way for heavy amount loans like home loan, car loan, etc by revealing a favorable history of credit-record. If the user is prudent enough to use it as per his/her indispensable needs by repaying all the cash amount on time without causing a superfluous delay, he within a few hours has got to be granted a new loan, on the basis of credit history.

The credit card permits the user to meet his/her urgent needs if the situation warrants him/her during a natural calamity or accidents like flood, conflagration, road accident, etc. Proving to be of extraordinary advantages the credit card permits the user to use the credit card beyond a permissible limit. Few credit cards belonging to some specific banks and financial institutes offer a great discount on the purchase of some particular goods. It is done for promoting the sales of respective products shifting the burden of expenditure on you through the credit card. Beware of such offers. Try not to be influenced of any such allurement, without becoming avaricious of the rebated goods and make sure that you repay the amount on time of whatever purchase youve done already through a credit card, in order to avoid superfluous burden falling onto your shoulder. Disadvantages of credit card Though using a credit card brings a lot of advantages to the credit card holder, there are many invisible disadvantages as well which the credit card holder may come across if he is not aware of its contrary effects on credit card users Rudimentary usage of the credit card, where on the one side, does not restrict the user from making further arbitrary purchases, it hacks him after some time provided the user doesnt make monthly repayment owed by him on the other. If you have made the purchasing through your credit card worth $200 against $50 actual amount deposited in your account and are adamant to continue on ashopping spree without bothering to know how much you owe to the bank, you will be slapped a biggest amount of dues without being intimated before. Beware of imprudent shopping through credit card. Dont go for purchasing beyond your monthly repaying capacity. The credit card issuing banks and financial institutes make money by showing a dream of huge cash. Almost all the status conscious people in the US get trapped into the dragnet of credit card and do pay a heavy amount as the debt mount charged every month by the banks from them. If you miss your credit card somewhere or it is stolen or misused by some one, the onus still will lie on your shoulder, provided you fail to intimate the respective bank or financial institute by phone or in person immediately of credit cards going out of your possession. Though some banks do not charge even a single a penny against fraudulent purchasing through the missing credit card, after being intimated by the customer, some banks do charge a meager amount of money from the real card holder.

ADVANTAGES The major benefit of a credit card is that the individual using it does not require ready cash to make payments for various purchases. Several other important benefits are listed out in details below. No immediate cash

No immediate cash is required for several expenses when a person has a credit card. This will ensure that the person does not have to carry the money with him/her at the time of making the expense. The no immediate cash option helps settle the amount of the credit card bill by the consumers at their convenience using the various options given for payment. Free credit Free credit is the advantage that sets credit cards apart from other types of borrowings. Most of the borrowings by an individual whether short term or long term come with a cost in the form of interest. As long as a person pays within the credit period the amount spent using a credit card, there will be no interest charge to be paid, which means free credit for the cardholder. However, one has to be alert in using the credit because any slip-up can lead to a position where he/she needs to pay a heavy charge. Worldwide usage The best thing about a credit card is that there is no restriction about the time and place of its use. A credit card can be used in any city; more importantly, when traveling abroad it frees a person from having to keep foreign currency with them. This is a major relief because carrying foreign currency around in a foreign land becomes a bit difficult task for any traveller. Thus, a credit card becomes very important for someone who is on a long trip across different nations or needs to travel worldwide for business. Tracking expense The limit on a credit card is fixed. This means that a person knows the maximum amount that can be spent on his/her credit card. If cardholders take due care this also becomes a way in which they are able to track the expense that they make, and this can limit the amount spent by them using their credit cards. Having credit cards with a specific limit will help in achieving this objective. E-buying A credit card is essential for e-buying. It means if you want to buy something over the Internet you need a credit card as most ecommerce sites allow payments only through credit cards. Cash withdrawal You can use your credit card to withdraw cash from ATMs in case an urgent need arises. But remember, there is no free credit period on cash withdrawals and they attract interest from day one. Also, the interest rate on cash withdrawals is generally high. It can range from 26% to 45% annually. You will also have to pay a cash withdrawal fee of around 2% to 3% of the amount withdrawn. DISADVANTAGES

There are various features of a credit card that seem to be a gift for the person using the card. But a little bit of carelessness can change the entire position and the same factor can end up being a curse for the credit card user. The cost for this has to be paid in the form of higher interest and charges that make it a costly way to use funds if due care is not taken. Interest cost The interest that a person pays while using a credit card is the highest among all the options available in the market. Specific loans come at reasonable rates, for example, a car loan can be taken at an interest rate of 14%-15% per annum. Similarly, a personal loan where there is no restriction on the end usage is available at the rate of 18%-19% per annum but when it comes to a credit card the amount paid by a user is anything between 35%-42% depending upon the exact rate charged. This makes credit cards one of the costliest ways of borrowing, and hence one has to be extra vigilant in trying to avoid this high cost. Charges The payments made by a credit card user do not end with interest charges because there are a lot of other payments that might be required to be paid on the credit card. This is mainly in the form of penalties and charges. For example, inability to pay the required amount of the credit card in time can lead to a late payment charge that can be anything between Rs 300-Rs 500. Similarly, making expense over the credit limit might be permitted by the credit card company but this comes at a hefty price in the form of a high charge. All these can add up to a significant figure, increasing the overall cost of using the credit card. Credit trap Things are great as far as the usage of the credit card is concerned when things are under control. In such a position, there can be no charge and no interest payment but the moment one falls into the revolving cycle there are a whole lot of factors that impact the person at the same time. For example, the moment one full payment is missed every single expense is covered by the interest rate and no credit period is available. Similarly, more and more usage of credit cards is encouraged which often makes the payback a difficult task for the user. Multiple credit cards The other disadvantage is that people accumulate more and more credit cards as these are issued very easily by banks. This makes the problem of managing multiple credit cards a very difficult task. Remembering the payment dates and amounts for each one along with the other requirements often become a tough task leading to missing out on some occasions. This can result in a large amount of

charges coming in which is an additional cost. Using multiple credit cards also leads to lower control over the overall finances because of the large amount of borrowings that pile up.

Overspending A credit card is the worst enemy of impulsive buyers. A credit card user is always liable to develop a tendency of overspending. For example, if your salary is Rs 50,000 and the credit limit on your card is Rs 1,00,000, it doesnt mean that you can afford to spend Rs 1,50,000. The additional Rs 1,00,000 is just a loan facility provided, and as all loans are repaid this one too needs to be paid off.