Pros and Cons of Credit Cards

A man holding a credit card in each hand weighing the pros and cons of credit cards.

Today, credit cards reign as one of the most popular payment methods with 84% of adults in the United States owning a credit card. For most Americans, credit cards are their first introduction to managing credit with 73% of Americans having a credit card by the time they turn 25. Even though they're widely used, it's imperative to understand all the pros and cons of credit cards. Let's explore the pros and cons of credit cards, how to manage your cards responsibly, and potential alternatives.

What Are the Pros Of Credit Cards?

Credit cards offer a bevy of benefits over cash and other forms of payment, such as:

  • Help build credit
  • The ability to pay over periods
  • Extra convenience
  • Earn reward points
  • Security and fraud protection

    Credit Cards Can Help Build Credit

    Your credit history is your track record of borrowing funds and paying them back as intended. According to Experian, the credit score they calculate for consumers is comprised of five different factors:

  • Payment history represents up to 35% of your credit score.
  • The total balance owed on your credit accounts can account for up to 30%
  • How long you've held credit accounts represents 15% of your credit score.
  • Credit mix or the diversity in types of credit represents 10%.
  • The number of hard inquiries you have within a certain period accounts for 10%.

    Responsibly using your credit cards can help improve every credit score factor, bolster your quality of life, and move you closer to your financial goals.

    Pay for Goods Over Time

    When you use a credit card, you don't necessarily have to worry whether you have the exact amount in your checking account. Instead, a credit card allows you to receive your goods today and possibly spread your payments out over a period. And as long as you pay your credit card balance off within the grace period, you may not be charged interest. The grace period on most credit cards is the time between the end of your billing cycle and payment due date.

    Unrivaled Convenience

    Thanks to technological innovations, paying for your goods with a credit card can be as easy as tapping your card onto the processing machine. Most online merchants allow you to store card information on their secure platform. You can even store your credit card information on your smartphone or smartwatch to make purchases without physically having the credit card in hand. Whether you use your smartphone, digital wallet, or physical credit card, paying with credit cards is as easy as it can get.

    Reward Points

    One of the major perks of using credit cards is the perks or reward points. Today, 87% of cardholders have at least one card that offers rewards, according to a LendingTree Survey. Reward points are incentives you earn from doing what you will already do — spend money. These points can be redeemed for cash, discounts, savings, and more. For example, if you spend $5,000 a month on monthly expenditures and use your 2% cash back credit card, you would earn around an extra $100 a month in rewards points from doing what you are already doing. In about a year, you can earn around $1,200 in Cash Back rewards.

    Increased Security

    In addition to the other pros of credit cards, this form of payment is much safer. Consider this: if you lose $1,000 in cash, it's just gone. However, if someone steals your credit card or personal information and runs up $5,000 in fraudulent charges, you may not be liable for the charges. At the same time, most credit card companies will monitor suspicious activity and alert you to review the charges.

    Cons of Credit Cards

    While credit cards have advantages, they are not without cons, such as:

  • High potential to overspend
  • May be subject to interest and fees
  • Devastating impacts when misused
  • Potentially dangerous fine print

    Let's quickly explore each to understand potential implications.

    High Potential for Overspending

    Too much of a good thing can be bad — and convenience is no different. Remember the convenience of a credit card? It can also increase the likelihood of you overspending. To avoid overspending, stay informed of your balance and only spend what you can pay back each month or what your budget allows.

    Some Credit Cards Have High-Interest Rates

    While credit cards are convenient, you may pay a high cost for this benefit. Credit cards have a much higher interest rate than other lending products, such as personal loans. For instance, the average interest rate on credit cards in August of 2022 was 16.27%, while personal loans were only 10.16%. Failing to pay your balance each month can lead to interest charges, which can increase your debt.

    Cash Can Be Expensive

    Credit cards are excellent for day-to-day purchases and expenses. But if you need cash, your credit card can be the most expensive source. While your credit card may offer cash advances, the interest rate on this money is significantly higher than on purchases. If you find yourself in need of cash, consider a personal loan or another source.

    Credit Card Misuse Can be Very Harmful

    When you use your credit cards responsibly, it can offer you extra freedom and help build positive credit references. However, if you have missed or late payments, it can devastate your credit and long-term financial fitness.

    Beware of the Credit Card Fine Print

    Credit card disclosures and fine print aren't designed to be user-friendly. Attorneys draft these multi-page documents to protect the interests of the credit card company. Oftentimes, key information is buried and not exactly easy to understand, such as:

  • The repercussions if you miss payments, such as halting no-interest or low-interest rate cards;
  • The repercussions of late payments, such as an interest rate hike;
  • What happens whenever an introductory rate expires;
  • Payment grace periods;
  • Your cash advance fees;
  • How does the provider decide to reduce your rate; and
  • More

    10 Simple Tips to Maximize the Pros and Minimize the Cons of Your Credit Card

    Your credit card can be a valuable tool as long as you use it responsibly. Here are a few tips to maximize the pros and minimize the cons of your credit card.

  • Always make on-time payments to reduce potential fees and help build your credit.
  • Pay more than your minimum monthly payment to reduce interest charges.
  • Pay your entire balance monthly to avoid interest.
  • Never spend more than what you can pay in a month.
  • Always remain below your credit limit to keep your credit utilization ratio low. The Consumer Financial Protection Bureau (CFPB) suggests you keep your credit utilization ratio below 30% to maximize your credit score.
  • Read and review your credit card statement every month for accuracy.
  • Use the credit card provider's mobile app and website for real-time updates on your account.
  • Leverage alerts, payment reminders, and digital tools for your benefit.
  • Always monitor your credit to spot errors and fraud attempts. Many credit card companies may offer free credit monitoring tools.
  • Use strategies to maximize rewards.

    Alternatives to Credit Cards

    While credit cards are convenient for day-to-day purchases, credit cards may not be suitable for all instances, especially when you need cash. Here are a few viable alternatives to credit cards:

  • Personal loan
  • Bad credit loan
  • Secured loan
  • Unsecured loan
  • Installment loans
  • Car title loan
  • Co-signed loan
  • Pawn Shop loans
  • Payday loans
  • Quick loans

    Frequently Asked Questions

    What Is the Biggest Problem with Credit Cards?

    The biggest problem with credit cards is the potential for high-interest debt. If not used responsibly, credit cards can lead to a cycle of minimum payments and accruing interest, making it difficult for the cardholder to pay off the balance. Additionally, if not managed properly, credit card debts can quickly spiral out of control and harm your overall financial stability.

    Can I Use a Credit Card Every Day?

    A credit card can be useful for everyday purchases. However, it's important to remember that you'll need to make regular payments to avoid additional fees. There are many factors to consider when determining the best ways and times to use a credit card.

    What Is the Point of Getting a Credit Card?

    The main reasons people get a credit card is to have more purchasing power and to establish a credit history. It's crucial to understand your reasons for wanting a credit card so you can make the most of it.

    Contact Integra Credit

    Integra Credit offers a fast and hassle-free online application you can complete in a few minutes and receive near-instant approval decision. Most importantly, approved customers can receive their money as soon as the next business day*! Apply now.


  • Recent Posts

    How Does Credit Card Interest Work?

    The importance of your credit score can't be overstated. Lenders, employers, apartment landlords, and retailers use your credit score to determine eligibility. A high credit score can open many doors and serve your financial needs for several years. One way to potentially establish or improve your credit score is by using a secured or unsecured credit card. And if you have a credit card, you must understand how credit card interest works. Let's take a closer look at how credit card interest works.

    Read More >
    How to Cash a Check without an ID

    Since the end of the 17th century, checks have been commonplace in Western civilization. While innovative digital payments — such as peer-to-peer (P2P) payments and digital wallets — have dominated the financial scene over the last decade, physical checks are still in use. If you've recently received a check, you may want to convert this paper IOU into cash. However, not having acceptable identification can make it difficult. Fortunately, we've outlined what you need to know about cashing a check without an ID.

    Read More >
    Debits vs Credits in Accounting

    If you've read the most basic accounting book, you've likely heard of debits and credits. While the terms may be familiar, they take on an entirely new meeting in accounting. For example, when you slide your bank debit card, you remove money from your account. In this instance, debits decrease your asset account balance. On the other hand, if the bank makes an error or decides to reverse fees charged to your account, they will issue you a credit. In personal finance, a credit would increase the balance in your asset account. However, it's almost the exact opposite when it comes to accounting. Let's take a closer look at the debit vs credit in accounting.

    Read More >

    Apply Quickly & Securely

    Apply Quickly
    & Securely

    Fast, short and
    secure application
    Instant approval
    Choose how much
    cash you need
    Money in your account
    as early as tomorrow*