16 Advantages and Disadvantages of using Credit Cards | finder.com
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Benefits and disadvantages of a credit card

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Weigh up whether a credit card is right for you with our comprehensive list of pros and cons.

Credit cards can be a convenient way to manage your finances, but they can also be expensive and risky. If you’re deciding whether or not a credit card is right for you, here are some of the main benefits and disadvantages you can weigh up to make your decision.

If you’re wondering whether a credit card is a good fit for you, you can also use our lists of who credit cards are suited (and not suited to) to help make the right choice.

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9 Benefits of using a credit card

Some of the perks that come with paying on plastic include:

  1. A credit card is safer than carrying cash. While there’s only a small chance of having lost or stolen cash returned, a credit card can quickly be cancelled if you lose your wallet. Most financial institutions also have security processes in place to protect you if your card has been lost or stolen or if you suspect your account has been used for a fraudulent transaction. If you’re in any of these situations, make sure to contact your bank to report the issue as soon as possible.
  2. A credit card can build your credit rating. Your credit card account details and payment history make up a key part of your credit profile. If you keep your account in good standing, this information will help you build up a good credit score, which could increase your chances of approval for other products such as car loans or a mortgage.
  3. You can get interest-free days. If you pay your balance in full before the statement period ends, you can be rewarded with interest-free days on future purchases for a set period.
  4. Earn reward points when you spend. Rewards and frequent flyer credit cards allow you to earn reward points on every dollar you spend on eligible purchases, such as the groceries and petrol costs. Rewards credit cards let you earn reward points to redeem with the bank’s rewards programs for perks including flights with partner airlines, products from the rewards store or cash back. Frequent flyer credit cards, on the other hand, let you earn flights with specific airline loyalty programs.
  5. You can request a chargeback if you’re unhappy with a product or service. You can request a chargeback through your credit card company if you have a dispute with a merchant, either in-store or online.
  6. Credit cards work in any currency. Although currency conversion fees usually apply, you can use your credit card overseas to make purchases in a foreign currency. There are even credit cards that waive fees for international purchases, which could be useful if you often shop at overseas online stores or have an international holiday coming up.
  7. Credit cards give you an emergency line of credit. Credit cards can be a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that arise. Remember that you have to repay everything you owe, though.
  8. Credit cards often have complimentary extras. Credit card features such as travel insurance, purchase protection and extended warranty insurance can save you money and give you peace of mind. Other value-adding features include complimentary flight offers, airline lounge passes and even free wine when you dine.
  9. You can consolidate debts and save money on existing balances. Balance transfer credit cards allow you to move existing high-interest debts to a new account with a low or 0% promotional interest rate. This can save you money on interest charges and help you pay down debt faster.

7 Disadvantages of using a credit card

The downsides of spending with a credit card include:

  • Paying high rates of interest. If you carry a balance from month-to-month, you’ll pay interest charges. Purchase and cash advance interest rates can be as high as 22% APR, so you can end up paying hundreds or thousands more than you initially charged in interest if you’re unable to make repayments each month.
  • Credit damage. Missed credit card repayments and ongoing debts are recorded on your credit file and can impact your chances of getting a loan down the track. See our guide on how to improve your credit score for some tips.
  • Credit card fraud. There are a range of fraud schemes that target credit cards. While you can be compensated for illegal transactions on your account, dealing with credit card fraud can still be a time-consuming and stressful experience.
  • Cash advance fees and rates. Financial institutions make it very expensive to use your credit card to get cash out or make other “cash equivalent” transactions, such as buying foreign currency or gambling. Using a credit card for a cash withdrawal will attract a cash advance fee worth around 3% of the total transaction amount. It also typically attracts an interest rate of 19–22% right away.
  • Annual fees. While you can often get debit cards without annual fees, most credit cards have them. These can cost as little as $25 per year, or as much as $1,200 depending on the card that you choose. Generally, the more perks you want, the higher the cost of the annual fee. If you want to avoid this charge, you can consider a no annual fee credit card — but make sure you look at all the other features to help find a card that works for you.
  • Credit card surcharges. Businesses often apply a surcharge when you pay with a credit card. For Mastercard and Visa products, this fee is usually 0.5–2% of the total transaction cost, while for Amex cards it could be closer to 3%. Whatever the case, this is an extra cost for the convenience of paying with plastic.
  • Other fees can quickly add up. Depending on your card, you could be charged fees when you miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance transfer fees and even some rewards programs fees. If you carry a balance or don’t have access to interest-free days, there’s also a good chance interest will be applied to these charges.

Advantages versus disadvantages of using credit cards comparison table

Compare credit cards

If you’re ready to open a credit card, the next step is to pick one that best fits your needs. Here you can sort through some of the top cards on the market.

Name Product Filter values Annual Fee APR for Purchases (Purchase Rate) Intro APR for Balance Transfer
$95
14.99% to 25.99% variable
0% for the first 12 months (then 14.99% to 25.99% variable)
Earn $200 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & Fees
$0
14.99% to 25.99% variable
0% for the first 15 months (then 14.99% to 25.99% variable)
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & Fees
$550
None (Charge Card)
Get 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel and 5X points on eligible hotels booked on amextravel.com. Rates & Fees
$0
14.99% to 25.99% variable
0% for the first 15 months (then 14.99% to 25.99% variable)
Earn up to $250 back. Earn $150 back after you spend $1,000 or more in purchases with your new card within the first 3 months of Card Membership. Plus, earn an additional $100 back after you spend an additional $6,500 in purchases within your first 12 months. You will receive the cash back in the form of a statement credit. Rates & Fees
$0
13.99% variable
0% for the first 12 billing cycles (then 13.99% variable)
A low, variable APR on purchases, balance transfers and cash advances.
$0 annual fee for the first year ($89 thereafter)
17.99%, 21.99% or 24.99% variable
0% for the first 12 months (then 17.99%, 21.99% or 24.99% variable)
Enjoy 60,000 bonus miles after spending $5,000 on purchases in the first 90 days.
$0
14.99%, 18.99% or 24.99% variable
0% for the first 15 months (then 14.99%, 18.99% or 24.99% variable)
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
$0
12.99%, 16.99% or 20.99% variable
0% for the first 18 months (then 12.99%, 16.99% or 20.99% variable)
An 18-month 0% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
$0
11.99% to 21.99% variable
1.99% for the first 6 monthly billing cycles (then 11.99% to 21.99% variable)
1% cash back to the nonprofits, K-12 schools, colleges and religious organizations of your choice.
$0
17.74% to 26.74% variable
Earn 10,000 Bonus Miles after spending $500 in purchases on your new card in your first 3 months of Card Membership. Rates & Fees
$0 annual fee for the first year ($95 thereafter)
17.74% to 26.74% variable
30,000 bonus miles after you use your new card to make $1,000 on purchases within the first 3 months. Rates & Fees
$0 annual fee for the first year ($95 thereafter)
17.74% to 26.74% variable
Enjoy a $0 annual fee on the first year and earn up to 2 Starpoints® for every dollar of eligible purchases. Rates & Fees
$95
17.74% to 26.74% variable
Earn 125,000 Hilton Honors™ Bonus Points after you spend $2,000 or more in purchases with your new card within the first 3 months of Card Membership. Rates & Fees
$0
17.74% to 26.74% variable
Earn 75,000 Hilton Honors™ Bonus Points after you spend $1,000 in purchases on the card within your first 3 months of Card Membership. Rates & Fees
$495
16.99% variable
0% for the first 15 billing cycles (then 16.99% variable)
Mastercard Black Card members receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
$195
16.99% variable
0% for the first 15 billing cycles (then 16.99% variable)
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
$995
16.99% variable
0% for the first 15 billing cycles (then 16.99% variable)
Earn points every time you spend. Luxury Card enhances your purchasing power by providing you with one (1) point for every one dollar ($1) you spend. Every purchase gets you closer to the rewards you want.
$39
24.99% variable
Designed to help build credit history with no deposit required and access to benefits.
$75 annual fee for the first year ($99 thereafter)
23.9% variable
The Indigo® Platinum Mastercard® Credit Card is specifically designed for those with less than perfect credit.
$75 annual fee for the first year ($48 thereafter)
29.99% variable
The First Access Card is a true VISA® credit card that does not require perfect credit for approval.
Up to
19.99% to 25.99% variable
Get 1% cash back rewards on eligible purchases including gas, groceries, and services such as mobile phone, internet, cable and satellite TV, terms apply.
$0
20.74% variable
Designed for college students to build credit history and earn rewards.
$35
19.14% variable
A secured Visa® credit card that helps you build your credit quickly.

Compare up to 4 providers

Name Product Filter values APR (Annual Percentage Rate) for Purchases Annual Fee
24.9% variable
$0
A no annual fee credit card and discounts when you shop at Target.
See issuer's website
$0
The Fingerhut Credit Account is store-specific, and used to finance purchases made from Fingerhut.com or Fingerhut FreshStart's catalogue.
See issuer's website
Helps you keep building your credit as you buy great name brand products.
See issuer's website
Get instant access to purchase items in the Fingerhut store with no overlimit fees.
$300
Get a $500 credit limit to make purchases on the Horizon Outlet website.
$0
Build your credit history with Horizon Card Services. Get an unsecured line of credit and the best customer service.
Shop the items you need at myuniqueoutlet.com with up to a $1,000 credit.
24.65% variable
$0
28.74% variable
6, 12, 18, and 24-month financing options available and special promotions just for cardmembers.

Compare up to 4 providers

Name Product Filter values Annual Fee APR for Purchases (Purchase Rate) Intro APR for Balance Transfer
$0
8.90% to 25.90% variable
This card offers the same low rate for purchases, cash advances and balance transfers.
$35
11.90% to 21.90% variable
You can get travel benefits (no foreign transaction fees), retail benefits and collision damage waiver coverage on your rental car.
$35
11.90% to 21.90% variable
Get a card that can help you build credit. Determine your own credit limit. When you apply, you'll open a two-year certificate of deposit (CD) with $250 to $5,000. The balance of your CD is your credit limit.
$0
11.9% to 27.9% variable
Earn 2X points per dollar spent on gas and dining. Earn 1 point for every dollar spent on all purchases.
$0
13.9% to 27.9% variable
Earn 1.5% cash back on every purchase with no limits or category restrictions. Pay no annual fee, no penalty APR and no foreign transaction fees.
11.9% to 27.9% variable
You can get cash back (unlimited) on groceries and gas and on most purchases and get car rental insurance as well.
$0
13.90% to 27.90% variable
Earn $150 bonus after you make $500 in purchases within the first 90 days of opening your account.
$0
12.90% to 27.90% variable
0% for the first 12 months (then 12.90% to 27.90% variable)
Earn 2,500 bonus points credited to your account with your first purchase and then 1 point per $1 spent. No expiration date.
$0
12.65% to 27.65% variable
0% for the first 12 months (then 12.65% to 27.65% variable)
This card lets members show their support for The American Legion. Earn one point for every dollar spent on your everyday purchases.
$0
12.65% to 27.65% variable
0% for the first 12 months (then 12.65% to 27.65% variable)
Get 2,500 Bonus Points after your first purchase. Start earning 1 point for every $1 spent. Redeem your points and donate to your favorite military affiliate group.

Compare up to 4 providers

Name Product Filter values APR (Annual Percentage Rate) for Purchases Annual Fee Interest Free Period
19.14% variable
$35
Up to 25 days
A secured Visa® credit card that helps you build your credit quickly.
9.99% fixed
$49
Up to 25 days
Low fixed interest rates with no penalty rate.
10.49% variable
$49
Up to 25 days
9.99% fixed
$48
This secured card can help you rebuild your credit with an initial deposit of $200 to $1,000.
20.49% variable
$29
Up to 25 days
17.99% fixed
$39
Up to 25 days
Borrow up to $10,000 and get your credit score back on track.
14.49% variable
$39
Up to 25 days
26.49% variable
$0
Up to 25 days
13.99% fixed
$39
Up to 25 days
Have little or poor credit? The primor® Secured Mastercard® Classic has no minimum credit score requirements and no processing or application fees to worry about.
9.99% fixed
$49
Up to 25 days
Fast, easy application process. No processing or application fees!
13.99% fixed
$39
Up to 25 days
Credit lines available from $200 to $5,000! You decide where you want to start and open your Personal Savings Deposit Account to secure your line.

Compare up to 4 providers

Should I use a credit card?

Credit cards are suited to certain types of people, but not others. As well as considering the pros and cons, you may like to look at the following factors to help decide if a credit card is right for you.

A credit card may suit you if you

  • Are at least 18 years of age
  • Are an US citizen, permanent resident or hold an eligible temporary visa
  • Have a regular source of income
  • Regularly pay your bills on time
  • Want to keep certain transactions separate from your everyday bank account
  • Are keen to earn rewards for your spending
  • Need more flexible cashflow
  • Can afford to pay a little extra for the convenience

A credit card may not suit you if you

  • Don’t meet the age or residency requirements
  • Often struggle to pay bills on time
  • Don’t have a regular source of income
  • Can’t afford annual fees or interest charges
  • Have bad credit
  • Are happy to just use a debit card

If you’re thinking about getting a credit card, it’s important to consider the benefits and disadvantages they offer based on your own circumstances. As well as helping you decide whether a credit card is right for you, this process can narrow down the range of cards you compare so that you can find an option that works for you.

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Adrienne Fuller

Adrienne Fuller leads the publishing team at finder.com. She has one goal: to deliver the accurate and transparent information she wishes she had when she made some of life's important financial decisions. When she's not helping folks save money, she's hiking with her two Catahoulas around her home in San Diego.

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US Credit Card Offers

Important Information*
Deserve® Classic Card
Deserve® Classic Card

APR

24.49
variable

Annual fee

0 For the first year
More info
Luxury Card Mastercard® Gold Card™
Luxury Card Mastercard® Gold Card™

APR

16.74
variable

Annual fee

995 For the first year
More info
First Access Visa Card®
First Access Visa Card®

APR

29.99
variable

Annual fee

75 For the first year
More info
Indigo® Platinum Mastercard® Credit Card
Indigo® Platinum Mastercard® Credit Card

APR

23.9
variable

Annual fee

75 For the first year
More info

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US Credit Card Offers

Important Information*
Deserve® Classic Card
Deserve® Classic Card

APR

24.49
variable

Annual fee

0 For the first year
More info
Luxury Card Mastercard® Gold Card™
Luxury Card Mastercard® Gold Card™

APR

16.74
variable

Annual fee

995 For the first year
More info
First Access Visa Card®
First Access Visa Card®

APR

29.99
variable

Annual fee

75 For the first year
More info
Indigo® Platinum Mastercard® Credit Card
Indigo® Platinum Mastercard® Credit Card

APR

23.9
variable

Annual fee

75 For the first year
More info
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