The main disadvantages of using a credit card
This article discusses the problems some credit card holders face when they are buying items and services. Not saying that everybody who uses credit cards will incur debt problems, because if you are responsible a credit card is a good thing that will benefit your credit rating. However, there are a few things to consider before getting another line of credit.
One of the major disadvantages of credit cards is that their interest rates are often very high. They can range from 15 percent to as much as 40 percent, which means borrowing money through a credit card has sometimes been very expensive. When paying for items or services, it is often cheaper to use a debit card. Credit cards often involve a price which is around 3 percent more which can turn out to be a lot of money in the long term.
It can be also be quite expensive to withdraw money, as there is usually a 2 to 3 percent fee involved. A debit card is cheaper to use from taking out money from your account. When you are travelling abroad you are charged a fee for converting your currency (Dynamic Currency Conversion). Retailers often incur a handling fee which adds further to the costs.
You must use your credit card regularly; otherwise you may be subject to a fee of up to Â£30 a year if you haven’t used it for 6 to 12 months. This is what is known as an inactivity fee. Some cards are also beginning to introduce annual fees so if you credit card company is one of them then you could always consider switching to one which doesn’t incur these fees.
The PPI (Payment Protection Insurance) is supposed to protect customers by paying their bills when they are ill or have been involved in an accident. However, many insurance claims are often rejected and the insurance is much overpriced.
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