Advantages and Disadvantages of Having a Credit Card

You probably know what a credit card is. But are they all created equal? Are they all the same? Should you know much more that what is a credit card?

Yes. Not all credit cards are created equal. Furthermore, they come with advantages and disadvantages which you should know before getting one and start swiping.

Credit card products come in a wide assortment these days. Some credit card programs will ease their terms and conditions and offer perks for people with stellar credit, such as travel insurance, concierge service and free entertainment. Other credit card program may help a person reestablish their credit.

Credit cards are not created equal. And not all cards are for everyone. For one, the ability to get a credit card will depend on whether you qualify. Do you have a history of establishing credit and able to pay bills on time?

Credit card issuers learn about your credit history by pulling your credit report from credit bureaus. Therefore, before you even begin applying for a credit card, check the status of your credit report and make sure it doesn’t have any errors that could prevent you from getting the card you want.

Here are the most common types of credit cards:

Standard Credit Cards

This is the most common card young professionals can get. Standard credit cards are the general purpose cards that have revolving credit lines. They are usually offered to people above the age of 18 who meet or exceed the financial institution’s minimum credit criteria. No deposits are needed and the credit limit is established by the credit card issuer.

Reward Cards

There are credit cards which market reward programs. Doing this can influence people to spend more and get more and more rewards. This works well for banks.

The perks from this reward credit cards may come in the form of cash, points or discounts. Points that accumulate, for instance, can be traded off for free hotel stays, merchandise, air travel car rentals and certificates. However, these credit cards can come with complex rules, limits and restrictions. The key is to try to make sure that annual fees don’t end up eliminating all the benefits. Rewards cards are typically best for people who pay their balances off every month.

Airline/Frequent Flier Miles: Using these cards can earn airline miles. The miles accumulate and can be put toward future flights. Some programs partner with hotels, car rentals and other travel services.

Cash Back: Cash back cards literally give some of the money you have spent back to you in cash. Credits range from 1-5%.

Points Cards: These cards let you earn reward points that can be redeemed for merchandise, entertainment and gift cards. These include points that can be put toward gas, hotel stays and home improvement purchases.

Premium Credit Cards: These are the “gold” and “platinum cards”. They are generally referred to as “upscale”. They are offered to consumers with excellent credit, which means they’ve retained this standing for few years, and can afford high credit limits. These consumers typically have huge salaries and are heavy spenders and travelers. Some cards are offered by invitation only. The interest and annual fees, however, tend to be high. The cards’ perks may include 24-hour concierge services or a personal assistant, access to exclusive airline lounges, and worldwide travel and auto assistance.

Secured Credit Cards

Secured credit cards are known as pay-as-you-go cards. Upon opening the account, the card holder deposits a few hundred to a couple of thousand pesos (usually 10,000 pesos). This determines the cardholder’s credit line. This limit is often based on a percent of the deposit, which is usually 50-100% of what you put into the account. The cards have an annual fee and higher annual interest rates. Most often, these cards are used to reestablish credit. A person can use the card to make small purchases that they can easily repay.

Specialty Credit Cards

Specialty cards typically are offered through affiliations, partnerships, major brand retailers or service providers. Many specialty credit cards share a partnership between organizations that support a social cause, professional organization or an alumni association. A small portion of the purchase goes toward the intended organization.

The ease in swiping a credit card for a purchase has its pros and cons. It may either help when handled properly or become a detriment. If you are able to pay your bills on time every month and not carry over a balance, credit cards are a great convenience. The cards can also land you deep in debt. This often occurs if you’re unaware of the terms of the credit card agreement, and if you carry too many cards.


  • You can use them practically everywhere, especially overseas.
  • They can boost your purchasing power because they can be used to buy goods and services over the phone, through the mail and online.
  • They provide financial backup in the event of an emergency, such as an unexpected healthcare cost, job loss or auto repair.
  • They allow you to purchase items and pay them off in monthly installments. They offer discounts at stores and rewards. For instance, when you make purchases using the credit card you can collect points; these points accumulate and can be used to get free items, such as airline tickets.
  • Some cards may offer cash back as an incentive to use the card.
  • They can help build your credit history.
  • They keep a record of your expenses, helping you to monitor your financial activities.
  • They help raise your credit score, such as the FICO credit score, when you pay balances down by the due date. This improved credit history paves the way for lower rates borrowing rates on other loans, including a mortgage.
  • Credit cards allow you the right to dispute billing errors and defective merchandise.
  • They allow you withhold payments.


  • Credit cards can have their disadvantages, though, especially when they’re used in an unwise manner.
  • Some consumers feel compelled to spend more money than they have.
  • Consumers may continuously roll over a balance for several months.
  • When you default on credit card payments, you are charged with late fees and interest, increasing your debt load.
  • Carrying a large amount of credit cards also isn’t too favorable in the eyes of lenders.
  • Acquiring too much credit card debt can ruin your credit score.
  • Studies have indicated credit card debt as a significant factor in consumer bankruptcies.
  • Credit card fraud is a possibility.

Avoiding Credit Card Pitfalls

In order to avoid the pitfalls of credit cards and maximize their benefits do the following:

  1. Keep track of your purchases by closely reviewing your monthly statements.
  2. Have a budget and avoid overspending.
  3. Make an effort to pay off credit card balances at the end of the month.
  4. Make purchases with reliable companies and take extra precautions when making purchases online.
  5. Report stolen cards immediately to the credit card company.


Shargall, A. (2016). Advantages and Disadvantages of Credit Cards by MoneySupermarket. [online] Available at: [Accessed 18 Mar. 2017]. (2009). The Pros And Cons Of Owning A Credit Card | [online] Available at: [Accessed 18 Mar. 2017]. (2017). Pros and Cons of Using a Credit Card – HSBC Bank Malaysia Berhad | HSBC Malaysia. [online] Available at: [Accessed 18 Mar. 2017].

Leave a Reply