Pros and Cons of Using a Credit Card

man uses credit card at computer

Depending on how you use it, having a credit card can come with positive or negative outcomes. If you have a limited credit history or no credit history, a major advantage is that it can help you build positive credit. On the flip side, misusing your credit card by spending beyond your means can do some serious damage to your credit.

Understanding the pros and cons of using a credit card is important, which is why we’ve compiled a list of them below:

Pros of using a credit card

  • Can help you build credit if used properly
  • Opportunity to earn cash rewards
  • Provides protection against fraud
  • Alleviates the need to carry cash
  • Allows you to track your spending

Cons of using a credit card

  • Can lead to overspending
  • Carrying a balance from month to month typically results in interest payments
  • Late or missed payments can affect your credit scores

How to build your credit using a credit card

  1. Spend within your limits.
    Since credit scoring models may look at how close you are to being "maxed out" on your available credit, try to keep your balances low in proportion to your overall credit limit. Experts advise keeping your credit card use at no more than 30 percent of your total credit limit.

  2. Make on-time monthly payments.
    Paying your bills on time every month can certainly help to improve your credit. Setting up automatic payments and/or reminders can help you develop good credit habits and stay on track with your finances.

  3. Try to pay more than the minimum payment.
    Did you know that making minimum payments on your credit card balance will cause you to pay more interest in the long run? Paying more than the minimum or, better yet, the balance in full, is a good way to improve your credit and build positive credit history.

Are you having trouble getting approved for car financing due to having bad credit or no credit history? Credit Acceptance is an indirect auto finance company that works with more than 12,000 car dealers across the nation to help car buyers get approved for financing. Once you fill out the form on our website, we will connect you with three enrolled dealers in your local area that can help you start your credit approval to buy a car.

Start Your Credit Approval Today!