The Pros And Cons Of Credit Cards Essay Sample

It all started in 1946, when a banker from Brooklyn, New York had an idea to make customers at his bank more loyal. John Biggins changed the face of banking for years to come. The creation of the credit card opened the door to a whole new world when it came to spending money. After many changes and developments to the banking and card system, credit cards are used every single day. In February 2021, Shift Credit Card Processing found that “more than one billion Americans use credit cards, and more than two billion credit cards are in use worldwide” (Shift Processing 2021). As many positives that credit cards bring, they also come with quite a few negatives. 

The most simple way to describe a credit card is that it allows a cardholder to purchase goods or services with borrowed money. However, it is much more difficult than that. In an article describing how credit cards work, Melissa Lambarena says: “Once approved for a credit card, the bank authorizes a credit limit...when your bill comes, you have the option of paying a certain minimum amount, paying the whole balance in full, or paying some amount in between” (Lambarena 2021). The limits on a credit card are based one the holder’s income, any other debts they have, or their accountability and credit with other cards. Paying the bill for the card is one of the most important aspects in having a credit card. Inability to pay the bill on time can result in late fees and interest charges. This means that on top of having to pay for the bill, you have to pay an additional fee, pay with interest, or even both. This can also lead to a serious amount of debt and a detrimental drop in your credit score. A credit score is basically how much you can be trusted with the money used on the card and if you pay it back. Stephen Vanderpool lists several different things that can harm your credit in his article. “Using cards irresponsibly can damage your credit. Things like high balances, late payments and frequent applications for new cards can knock points off your score” (Vanderpool 2013). In contrast to gaining certain benefits from building your credit with your credit card, you can harm your credit score and have less opportunities when it comes to getting loans or another card.

With a credit card, comes responsibility. Getting a credit card is a good way for young adults, or anyone in general, to become more financially independent and stable. Other than having to pay the bills on time, the cardholder also has to maintain a balance of using the car. On the Discover Card resource page, it lists the many benefits of using a credit card. “Putting a hold on a rental car or hotel room and paying for expensive items over longer periods of time rather than all at once” (Discover Resources 2017). With these advantages, it can be easy to become dependent on the card. A negative aspect to credit cards is how easy it is to use it too much, and overspend on the credit card. This not only damages your score, but sometimes gives those with cards the mindset that they can buy anything and just pay it back later. 

A positive to having this type of card means that you don’t have to worry about money being taken from your savings or checking accounts. You also don’t have to have cash on you at all times. Kevin Cash talks about this in his article about credit cards. He says: “Credit cards can be in your pocket at all times, ready to go whenever. Plus, if you lose your card, your issuer can just send you a new one. That’s not the case with cash” (Cash 2021). This is a very valid point. If you ever lose your card, you can have it replaced. With cash, however, you can’t get it back. This does not mean to use your credit card for every purchase you make. It is pretty easy to put yourself into debt with a credit card. Using it to the point where you can’t pay the bill will cause interest rates to go up. “Perhaps the most obvious drawback of using a credit card is paying interest. Credit cards tend to charge high interest rates, which can drag you deeper and deeper in debt if you're not careful” (Vanderpool 2013). As scary as this seems however, there are ways to avoid the interest rates going up. There are no increased interest rates for paying the bill in full every month. 

Credit cards have their pros and cons, like much in life. The most important part of having the card is to keep a balance and pay the bills. Credit cards come with much responsibility, but can also help teach money management as well. Being careful and smart with the credit card can make it a tool rather than a burden. The decision to apply and successfully own a credit card ultimately comes down to how the owner feels they would be able to manage and efficiently use it to establish a good credit score.