Credit cards are a great way to purchase the things you need now but want to pay for later. While it is possible for credit cards to be used to your advantage, irresponsible usage can negatively impact cardholders in a number of ways.

Whether you are a credit cardholder or plan to apply for one in the near future, it is important to know the pros and cons if you want to protect your financial health.

Pros of Credit Cards

• Build credit: Your credit card provider will report your monthly payments to the credit bureaus. The credit bureaus will use this payment information to calculate your credit score, so your credit card can potentially help you build credit and increase your credit score. However, if you want your credit card to have a positive impact on your credit, you’ll want to ensure you pay attention to the due date and how much you are paying on the balance due.

Click here to learn how credit cards affect your credit score

• Earn rewards/points: Certain credit cards offer consumers rewards or points when they make purchases. For example, some credit card companies will offer cardholders 10 points for every $1 that is spent. Once a certain amount of points is reached, the cardholder can redeem the points for cash, gift cards, airline miles, hotel stays, and more.

• Convenience: Not everyone has cash available to make their daily purchases. Like a debit card, a credit card is easily accessible when you need to pick up groceries from the store, coffee from your favorite cafe, or food for the family pet. You can also easily track those purchases and monitor your spending using the online account portal, which is something you can’t do with cash.

• Cash advances: Cash advances are available to cardholders who want to use cash rather than their card. Cardholders should note that this access to cash does come at a price, so they should expect to pay interest on a cash advance.

Cons of Credit Cards

• Increased debt: When you open a credit card account, you are adding to your debt. As you swipe your card for each purchase that you make, the amount you owe will steadily increase. For some people, as their debt increases, it becomes difficult for them to keep up with payments. Missing a credit card payment will ultimately affect them in other ways, including a decrease in your credit score, so maxing out your card isn’t always the best idea.

• Fees: Credit cards have a number of fees associated with them. You have to be careful because while some fees can be easily avoided, there are fees you will be charged no matter how you decide to use your card. For example, most cardholders will be expected to pay an annual fee, which will vary depending on the credit card. However, late fees and over-limit fees can be avoided if you keep track of your card balance and payment due date. 

• Interest: When your credit card bill comes due, part of the balance you owe may include interest, which is based on your credit score. Basically, if you purchase an item and do not pay the entire balance before the due date, you will have to pay interest for that purchase. This means that a purchase of $50 could end up costing you $75.

Although credit cards have a bad reputation, there is a right and wrong way to handle this responsibility. Proper management of your credit card is key if you want to get the most out of it. And even though there are some disadvantages to having a credit card, the good outweighs the bad when you use your card responsibly?