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Credit Cards: The pros and cons of owning a credit card

There are many pros and cons to credit card ownership, and having a full understanding of these will allow you to enjoy a healthier relationship with your credit card.

The main pro is the convenience of being able to pay for goods or services without physically handing over cash or organising a bank transfer of some sort. Look for a low interest credit card or a low or $0 annual fee credit card. The main con is the possibility of ending up in financial straits from overspending or not managing your debts wisely. If debt is an issue, perhaps a debit card should be considered.

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St.George Vertigo Visa

0% p.a. for 18 months on balance transfers
with a one-time 1% balance transfer fee

Offer ends 26 September 2018

Eligibility criteria, terms and conditions, fees and charges apply

St.George Credit Card Offer

The St.George Vertigo Visa offers a low ongoing rate on purchases, a long-term promotional rate on balance transfers and a competitive annual fee.

  • $55 p.a. annual fee.
  • 13.74% p.a. on purchases
  • 0.00% p.a. for 18 months with 1% BT fee on balance transfers
  • Cash advance rate of 19.49% p.a.
  • Up to 55 days interest free
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The pros of credit cards

    • Flexibility. Credit cards allow the customer to avoid having to carry large amounts of cash around. They are perfect for those occasions when an unexpected purchase becomes necessary, and sufficient cash is not available. They also allow for quick and simple phone and internet transactions.
    • Safety. When cash is lost or stolen, there may be no way of recovering it. If your credit card is lost or stolen, the card will be replaced, and your maximum liability for fraudulent use is limited by law to $50. However, Visa, Mastercard and American Express all operate zero-liability policies so that the customer is not liable for even a single cent.
    • Spending power. Credit limits on credit cards often mean that customers can purchase large goods straight away that they would normally have to save up for over many months.
    • Rewards programs. These reward the customer for their spending on a credit card so that they can claim rewards in various areas such as flights, retail rewards, and cashback.
  • Special offers and rates. Credit card providers will often announce special offers with affiliated companies, and regularly allow new or existing customers to make balance transfers at preferential rates.

The cons of credit cards

  • Overspending. When talking about the pros and cons of credit cards, this is the classic downside. Some individuals can get easily carried away with their credit card, creating a debt that is beyond their means to pay off. Credit cards should not be seen as having access to "free money". In fact, once the interest starts kicking in, you will end up paying more than the purchase price of your goods.
  • Multitasking. A credit card should be used for just one task. If it has a good rate for purchases, then it should be reserved for that. If a balance transfer is made to a credit card, then it should be used for nothing else. Problems arise when customers think it's okay to carry out both these transactions on their credit card simultaneously. This creates a conflict of interest - literally. The lower interest debt is always paid off first, which means the higher interest purchases will keep accruing interest untouched by your repayments.
  • False sense of security. Covering everyday purchases on a credit card can lead customers to believe they have more cash available than they really do. Having cash in your pocket must be logically balanced by the level of your credit card debt. If your credit card debt is building, your ready cash should be set aside to cover it at the end of the month.These are the main pros and cons to be aware of with credit card ownership. Remember that owning a credit card means you are involved in a legally-binding contract, so you need to make sure you are playing a straight game.
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