Like most things in life, there are always two sides to everything. We try to maximize the benefits and minimize the negatives. The same holds true with credit cards. They can be a valuable resource, but you have to use them wisely or they could cause trouble! Understanding the pros and cons of credit cards can help you navigate your financial decisions successfully.

Here are the Pros of credit cards:

• Convenience – You can use credit cards almost anywhere and for almost anything.
• Great for emergencies – If your car breaks down and you need it fixed, your credit provides you with an immediate sum of money.
• Rewards programs – These days you have so many choices when it comes to reward programs. If you want to save money on gas, get a card that gives you a discount. If you want to travel, get a card that give you free airfare mileage. If you want to start a college fund, get a card that will put money into your child’s college fund.
• Building your credit history – Credit cards are a quick and easy way to build up your credit score.
• Easy way to keep track of spending – Your monthly statement can help you maintain a budget, and manage expenses.
• Establish a business account – With a business credit card account you’re keeping your business and personal funds separate and establishing a business credit history.
• Security – If you lose your money it’s lost forever, but the bank can replace a credit card and stop any unauthorized purchase. And if you overpay for something or receive a defective product you can contest it or get your money back through your credit card company.
• Consolidation – If you’ve used several credit sources, you can consolidate payments into one payment.

These are the Cons that you want to minimize:

• High interest rates – Make sure you can pay off your balance each month.
• Fees and penalties – Choose credit cards that have lower fees and always pay on time.
• Identity theft – Having a credit card increases the risk of identity theft. Be sure to keep an eye on your statements, and shred them before discarding them.
• Increase debt – If you’re not disciplined, you can easily find yourself with a large debt. Don’t let your debt get out of hand.
• Credit score risk – If you have too many cards or don’t maintain them well, your credit score can drop quickly.

Here’s how to maximize the advantages:

• Use your credit cards in emergencies primarily.
• If you have a business, establish a credit card in your business name to separate your business and personal finances.
• Choose and use rewards programs wisely to maximize discounts, accumulate travel miles, start a college fund and meet other financial goals.
• If you have a lower interest rate or 0% promotional cards, use them to pay for large purchases, but make sure you can pay off the debt before interest rates increase.
• If you need to increase your credit standing or score, use your credit cards and pay on time. Carry some debt short term and then pay off the balance. Financial institutions are evaluating your ability to maintain your debt in calculating your credit score.
• Review your credit card statement every month and use it to maintain your budget. If you find that you are spending too much, switch to cash only purchases.
• Use credit cards for thoughtful purchases and never for impulse buying.
• Put all your automatic payments on credit cards so you have a record of them, but make sure you pay them off each month.
• If you have several higher interest payments that can be lowered by consolidating them onto a lower credit card, do so, but keep in mind that it’s only for the short term and you must pay them off before the interest rate rises or is due.

Credit cards are a modern convenience and can be beneficial if used properly. Are there other advantages that you can think of? We would love to share your tips with our community.