Top 4 Reasons Not to Use Credit Cards

It seems like everyone uses credit cards, but that doesn’t mean that it’s a good idea for everyone. While using a credit card is certainly convenient and there are certainly benefits to using them to make your purchases, there are some pretty compelling reasons why you shouldn’t use them.

Reason #1: Interest Rates are Very High 

If you are looking for a loan that you will repay over a period of time, a credit card is most definitely not your best option. While a card might be the most convenient option, the interest rates on credit cards are much higher than they are on more conventional loans. You will pay quite a bit more in interest when you use a credit card to float yourself a loan.

Reason #2: Credit Cards Encourage You to Spend More

Research has demonstrated that people paying with credit cards have a tendency to spend more than those paying with cash. There is something about watching cash actually leave your hands that makes more of an impact than sliding a card through a machine and signing your name. To encourage yourself to spend less, try paying with cash rather than a credit card.

Reason #3:  Puts You at Risk for Identity Theft

There is no way around it: using a credit card increases your chances of becoming a victim of identity theft.  Now, it’s generally very safe to use credit cards for transactions and card issuers limit your liability in the case of fraudulent purchases, but identity theft is a growing problem that card issuers have done very little about.  Any time your credit card information is used in the general public there is the risk that someone could steal that information if you’re not careful. While the risk is low if you take precautions, it is still a possibility. Every time a card statement is sent to you, your mailbox is a potential hot zone for a thief looking to steal your personal information. While there are precautions you can most certainly take to minimize the possibility of identity theft, you don’t have to worry about this problem at all when you pay with cash.

Reason #4: Card Issuers Change the Rules on You

When you apply for a credit card, you receive a packet of information containing the terms and conditions of your credit card agreement. If you’re like most people, you won’t even read this stuff. Like most of us, you simply assume that you are receiving the terms that were described in the letter inviting you to apply for the card. Unfortunately, you don’t always receive the terms that are advertised because they can be changed for a variety of reasons and always at the card issuer’s discretion. In addition, even if you do get the terms you expected, they may be changed at a later date. With cash, you always know what the terms are.

Credit cards are definitely convenient to use and many provide extra benefits that you cannot receive from cash or checks – such as purchase protection and extended warranty protection. At the same time, there are many drawbacks to using a credit card as well. Just make sure to consider the downside when determining if using a credit card is right for you.

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This entry was posted on Thursday, May 8th, 2008 at 8:27 pm and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.