Disadvantage Of Credit Card Essay

Using Credit Cards – Advantages and Disadvantages

The first credit card company was established by Western Union in the 1920s. Since then credit cards have gone from easily counterfeited paper cards to highly sophisticated cards with embedded computer chips that track your every purchase and automatically reports the charge to the users account. Unlike their predecessors which were limited to the store which issued the card, modern credit cards can be used to make purchases at most retailers, for online shopping, and to make cash withdrawals from ATMs. Using a credit card can provide many benefits for the user as long as they are wary not to fall into any of the pitfalls.

How to Get the Most From Your Credit Card

Regardless of your history with credit cards, there are ways to get the most from your cards in order to stay on top of your balance, without going overboard. Here a just a few tips that can help you to do so:

  • First, apply for a credit card that offers you maximum benefits and suits your needs. Interest rate, balance transfer charges, annual fee and reward points are the main factors of consideration before applying for a credit card. There are many online credit card comparison services that help you find the best offer. creditcardoffers.com.au allows you to do the same and their service is 100% free.
  • Use your card as a means to keep track of expenses. The best way to do this is to keep all of your receipts, and then check them against your monthly credit card statement. Should you notice any errors, you should immediately notify the credit card company. Usually, credit card companies are fairly helpful when it comes to removing bogus charges, along with any of the corresponding charges or fees.
  • You should also apply to be notified if your credit card notices any suspicious activity on your account. Many card companies even offer additional identity theft protection, which can be priceless should your identity be stolen.
  • Some card companies also offer damage protection if you should purchase products that are defective. This, too, can be worth it – especially if you purchase big ticket items such as electronics or appliances.

Advantages of Using a Credit Card

Credit History: For many first time credit card users the biggest perks of using a credit card is that it allows them to build a credit line. A good credit history is vital to purchase a home or a new car, and making credit card payments on time is a quick way to build a good credit history.

Ease of Purchase: A credit card makes it easy to buy anything at any time, without having to carry large amounts of cash.

Emergencies: In an emergency, such as an auto breakdown, where large amounts of money are needed on short notice a credit card can be used to make unexpected purchases, such as paying for a mechanic, or for a hotel room.

Disadvantages of Using Credit Cards

High Interest Rates:  Credit card companies make their money by charging high interest on all of the money you spend on your card. These interest rates will be far above those you would receive from a bank on savings, or have to pay on a bank loan, sometimes as high as 25%. This high interest rate can make it very easily to accumulate debt.

Credit Card Debt: The ease of purchasing with a credit card combined with the high interest rates make it very easy to inadvertently build up debt. And the longer this debt is on the credit card the more interest will be charged on it, creating even more debt.

Overspending: Combined with the risk of debt from high interest rates is the risk of blowing your budget. Most people have trouble keeping track of their spending when the money being spent is not physically in their possession. Credit cards make it easy to trivialize the amount being spent.

Scams: Credit cards can be stolen, either physically or just the numbers taken through a variety of means like identity theft and phishing scams. If a thief gets a credit card number they will be able to rack up debts on the users account.

Using Credit Card at ATM

One advantage of a credit card that is wrought with hidden disadvantages is using a credit card at an ATM. On the surface this may seem like a great idea, because it allows you to get cash for those few businesses which do not take credit cards. However, in addition to the charges from the ATM for withdrawing cash, with many credit cards you will have to pay an increased interest rate on any cash advances.

Avoiding Credit Card Debt

As long as the user is careful, it is easy to avoid credit card debt. Always be sure to keep track of your purchases, and be careful of your budget. Check your account frequently for unexpected charges, and never give your credit card number to anyone. Also, to avoid interest, pay off your balance at the end of every month.

And now, to those readers (mostly students), who have been asking to publish an essay on advantages and disadvantages of credit cards, it is live Here.

You should spend about 40 minutes on this task.

Give reasons for your answer and include any relevant examples from your own knowledge or experience.

You should write at least 250 words.


Sample Answer:
Credit card or plastic money is the latest phenomenon and offer a very efficient way to do transactions without handling the actual money. The booming of banking sectors in recent years, on the other hand, has made it possible to apply for and get a credit card easily than ever before. While the credit card offers a risk-free and convenient way of shopping or making any transactions, it has its demerits like becoming defaulter to the bank. My belief is that credit cards have far more advantages than the disadvantages it offers.

Initially, the credit card is easy to carry and possess little risk of robbery and pickpocket. The security system of a credit card makes it virtually impossible for a thief to steal someone’s credit card and use it. On the contrary, carrying a large sum of money is quite risky. From this regards, plastic money or better known as the credit card has made it possible to do hassle free transactions.

Secondly, by nature credit cards allows people to take credit from the bank and purchase their necessity from shops. From this perspective, it offers a great economic freedom to people. Online shopping or e-commerce business has become so popular because of the online credit card transaction facilities. Many small online shops can run their business and get payment instantly only because of the innovation of credit card and online payment. A shop owner is no longer doing local business and his customers are coming from every corner of the world and thanks to the credit card for making this happen.

Finally, the credit card allows banks to mobilise the money and this is quite an important aspect of the economic growth of a country. Think about the millions of transactions happening every hour via credit cards and its impact on mobilising the money and that would allow you to fully appreciate the importance of credit card in the global economy.
Undeniably there are some disadvantages of credit cards especially when people cannot repay the amount they have already spent or when they are hacked. However, this cannot degrade the usefulness of plastic money in the modern era. Banks should never grant credit cards to people with bad credit records or to someone who does not have an economic stability to actually afford it. In fact, the credit limit imposed on every credit card actually does restrain people from being extravagant and become a bad creditor.

In conclusion, every technology has some negative aspects and that does not make the technology bad itself. Bank authority should make strict rules about allowing credit cards to someone, and people should be more frugal when spending money they are obliged to return. Credit cards have so many advantages that make our life easier while the negative impacts could easily be controlled.

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