He’s not wrong: If you made an average monthly minimum payment of $26.67 on a $1,000 credit-card balance with 20% interest, it would take you more than 9.5 years to pay off the capital and interest. They can be really useful or they can be dangerous.” My colleague Leslie Albrecht recently wrote a Financial Face-off column comparing buy now, pay later (BNPL) to credit cards, and chose the latter due to the high interest rates for many BNPL loans, and the lack of protections afforded by BNPL compared to those of credit cards.īut Ted Rossman, a senior industry analyst at, also had this timely warning about the risks inherent in credit cards: “There’s a saying in the industry that credit cards are like power tools. When you open a card, the bureau does a “hard check” on your credit, which can hurt your credit score. Some people indulge in credit-card churning - opening new credit cards to get the sign-on bonus, and closing the cards before the next annual fee kicks in. Credit cards help you build a credit score, but you should also aim to keep your credit-card utilization rate - that is, your balance as a percentage of your credit-card limit - low. That interest rate is a good motivation to keep on top of your monthly bills. The risks are great: The average credit-card interest rate currently hovers at 20.3%, the highest rate recorded by. It happens slowly or suddenly, and often through impulsive spending. No one plans to get caught in a cycle of credit-card debt.
It happens slowly or suddenly, and often through impulsive spending.’ ”
“‘No one plans to get caught in a cycle of credit-card debt. For instance, almost all credit cards on the market offer “zero fraud liability” on fraudulent charges, meaning you won’t pay a penny on them. Debit cards do not, for the most part, offer rewards.Ĭredit-card companies also make returns easier, and you have more fraud protections with these cards. You fall into the latter category, and you are paying off your card every month while racking up rewards, air miles and other perks. There’s a big difference between living on credit and using a credit card for your spending. With convenience comes great responsibility - and risks. My question: Is there a downside to my using credit cards in my current limited financial situation?
#T accounts debit credit full#
I budget my money carefully and pay all my credit-card bills in full every month. I always pay with a credit card rather than a debit card. Even if I reported its theft, it might take time to get the money back.Īs a result, I don’t use cash. My worry is that if my debit card ever gets stolen and there are fraudulent charges, that money comes directly out of my checking account. I have always been reluctant to pay for things using a debit card.
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