Be aware of the pros and cons of credit card use.
Nov. 18, 2015 Whitepaper

Educating the Next Generation: The Pros and Cons of Credit Card Use


Credit cards have become a convenient and widely accepted form of payment for many individuals. When credit cards were first introduced, many consumers were afraid of negatively impacting their credit history by using them. Today, virtually every American household actively uses at least one, if not multiple, credit cards.

We’ve all heard stories regarding irresponsible credit card use, but there are also benefits to using credit in our daily lives. Here, we take a moment to highlight the pros and cons associated with daily credit card use.  

Pros of Credit Card Use

When used responsibly, credit cards can help individuals build credit, earn cash-back incentives, take advantage of store discounts or sales, and keep records of purchases. When paid off each month, credit cards build positive credit history and can increase an individual’s credit score. Credit scores take into account payment history, types of credit, the length of credit and more. A high credit score opens up opportunities for mortgage and loan approvals and additional lines of credit.

Credit cards also offer consumers a convenient payment option, as they are accepted virtually everywhere, including online and overseas.

Cons of Credit Card Use

There are, of course, downfalls to using credit cards. Individuals often spend more using credit cards than they would have using cash. In addition, because balances roll over each month, consumers can run into trouble if they get behind on their payments. Consumers are often charged high interest rates and late fees upon missing payments. Credit cards are also associated with an increased rate of fraud.

The Proper Use of Credit Cards

According to Investopedia, when using credit cards, there are certain measures that can help protect your credit and financial security*:

  • Keep track of purchases and closely review monthly credit card statements
  • Follow a budget to help avoid overspending
  • Pay off credit card balances each month
  • Make purchases with reliable companies and take extra precautions when making purchases online
  • Report stolen credit cards to the credit card company immediately
  • Understand your credit cards’ terms and conditions to ensure you stay within your credit limit and avoid late fees and interest rate increases

Although there are benefits to using credit cards for everyday purchases, there are also risks to be aware of. Before using a credit card, it is important to take into consideration your spending habits, budget and ability to pay the card off each month. It is also important to consider the card’s interest rate, credit limit, fees and penalties.

This document is for informational use only. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Kaiser Hoffman does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.

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