Financial Literacy 101:
Downsides to Using Credit Cards
Using credit cards (responsibly!) can bring the benefit of growing your credit score. But...what are the downsides of buying on credit and using credit cards? Read the full article here!
- Damage to your credit score if not paid off in full each month
- Huge interest rates and numerous fees
So, while what you bought might cost $100, with interest, it could end up costing you double or more when you include interest!
- Hidden rules in fine print (usually favoring the credit card company)
- Deceivingly low monthly payments (which have you paying high interest and again, paying way more than the original purchase price)
- Encourage impulse purchases, rather than wise budgeting & saving for expenses
- They actually increase your spending
Studies show...people spend more money when using credit cards than with cash!
- Encourage you to spend more money than you actually have
The major downsides of using credit when you don’t have the cash to pay it off later—besides the high-cost interest—includes hurting your credit, straining family and friend relationships, and ultimately bankruptcy.
The best practice for avoiding credit card fees and interest is to not spend money until you save enough to cover the purchase.