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Pros and cons of using credit cards

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    Credit cards offer buying power and convenience and many offer rewards, like cash back and airline miles. A credit card may be a suitable tool to help you manage money, protect purchases and build your credit history. At the same time, credit cards may present some pitfalls if you don't use them responsibly.

    In this article, you will learn:

    • The different benefits you can get with a credit card vs. a debit card 
    • Pros and cons of credit cards 
    • How to use credit cards wisely

    The differences between a credit card and a debit card

    To help you understand the benefits of credit cards, it's important to understand how they differ from debit cards.

    Credit cards

    • You receive a monthly bill 
    • You may carry a balance on the card 
    • You may borrow up to the limit of your credit line 
    • You can use your credit card to receive a cash advance
    • You pay interest on unpaid balances at the end of the billing cycle 
    • You can receive benefits like cash back, travel rewards and purchase protections 
    • You can build your credit history

    Debit cards

    • You may not spend more than the amount in your account 
    • You can incur overdraft fees, depending on your bank 
    • You aren't charged interest 
    • You can withdraw cash via ATMs or in-store 
    • You could be eligible for for added benefits 
    • Many checking accounts have a monthly service fee and other fees if minimum balances aren't met 

    Now that you understand some features of credit cards, let's take a look at the pros and cons of using one.

    Pros of using a credit card

    Credit cards offer purchasing power, convenience and some may offer a host of rewards and benefits.


    Credit cards are a convenient and trusted way to pay online and in person. They're widely accepted, so they can be used whether you're traveling at home or abroad.

    Companies may prefer you to use it

    Car rental companies and hotels often prefer customers pay with credit. This is because a credit card company has confirmed your identity, approved you to make purchases and put a hold on your card to cover the potential balance of a rental or stay.

    Financial insight

    Credit card statements also offer insights into how to manage your finances. Your monthly bill will reflect how much you spent, which helps to create and manage a budget.


    Some credit cards provide zero liability coverage so you won't be held responsible for unauthorized charges made with your card or account information.

    Credit building

    If you're starting out or trying to rebuild your credit score, paying with a credit card can help. If you use your card responsibly, including paying on time and in full, you may improve your credit.

    Using your credit card may give you an opportunity to build a positive credit history, which is an important factor that lenders consider when you apply for a mortgage or auto loan.

    Purchase protections

    There are many protections designed to give you peace of mind, which are especially helpful when buying big-ticket items with your credit card. These benefits (and the terms and conditions that accompany them) vary from card to card and may only be offered within a few months of purchase:

    • Purchase protection: Some cards provide repair costs or reimbursement if an item is damaged or stolen.
    • Extended warranty coverage: Your card may cover repairs or offer payment if an item breaks after the manufacturer's warranty expires.
    • Return protection: Although this isn't as common, you may be able to return goods when a retailer doesn't allow it.


    Rewards are one of the biggest benefits of having a credit card. Perks vary by card, but may include:

    • Sign-up bonus: Also known as a new cardmember bonus, you may get a generous, one-time bonus, which may be in the form of cash back, points, miles and gift cards. Bonus offers often require you to spend a certain dollar amount within the first few months.
    • Rewards points: Earn points for purchases and redeem them for travel perks, gift cards, merchandise and more.
    • Cash back: You may get up to 5% of purchases partially refunded in the form of cash back.
    • Frequent flyer miles: Earn airline miles for eligible dollars spent.

    Travel benefits

    There are many credit cards that can be used to earn specific travel related rewards. These rewards include:

    • Points for travel purchases like booking hotels and airline tickets
    • Bonus miles or points
    • Hotel stays

    Balance transfers

    Credit cards with a balance transfer option often offer a low intro APR for a period after you open the account. Sometimes balance transfers are used to move an existing high-interest balance to a new card with the lower rate. By paying less interest, you could save money and pay off debt more quickly.

    Cons of using a credit card

    When used responsibly, a credit card's advantages may outweigh the disadvantages. However, it's important to understand the potential risks of using a credit card.

    Interest rates

    If you're not able to pay your balance in full at the end of your billing cycle, you may have to pay additional interest fees, which can often times be high. If you're not mindful about your spending, this interest can build up and make it more difficult to pay off your existing balances plus the added interest.

    Overspending and the possibility of debt

    Spending more than you're able to pay back can accrue debt overtime. While credit cards give you purchasing power, it can sometimes be tempting to pay for items you may not be able to pay back later. Convenience could lead to overspending and you may accrue debt from interest and fees.

    Potential damage to credit score

    How you manage your finances can greatly impact your credit score. Credit bureaus including Experian™, Equifax® and TransUnion® collect information about your financial activity, like your payment history, and put them in a credit report. Missing payments or making late payments can significantly hurt your credit score if you are not careful. This could cause your credit utilization ratio to increase as well, which can also hurt your credit score.

    Added fees

    There are fees for balance transfers, return payments, late fees and, depending on the card, annual fees. Taken together, these fees and interest charges could offset some of the perks and discounts credit cards offer.While the above factors are definitely things to weigh when considering a credit card, many of these pitfalls can be avoided by simply being mindful in how you use your credit card.

    How to use your credit card wisely

    Here are some steps you can take to avoid common pitfalls of using a credit card:

    • Pay off your balance each month, on time and in full.
    • Avoid using your card for impulse purchases.
    • Don't buy expensive items if you can't pay them off promptly.
    • Use rewards cards when you can so you're maximizing your benefits.
    • Use your credit card statement to help with budgeting.

    In conclusion

    Credit cards offer a wide range of benefits, but it's important to remember that these benefits come with using your card wisely and responsibly. Now that you know the pros and cons of using a credit card, you can find out what type of card fits your spending habits and lifestyle. Learn more with our Credit Card Finder.

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