Are you tired of feeling your eyes burn into the back of your head as you count out change in the checkout line? Credit cards are quick and convenient and an essential tool in building credit. But as with any financial matter, it’s important to consider the pros and cons of credit cards before you ditch the coin purse. Disadvantages of credit cards include the potential to overspend and rack up debt. The same can hold true for credit cards vs. debit cards. 

It helps to know your goals when determining which piece of plastic you’ll add to your wallet (or not). So, let’s break down the pros and cons of credit cards, including how a credit union credit card, available through your local credit union, can help you get the most ‘pros’ out of your credit card experience.

Pros of credit cards

Credit card use is a significant factor in determining a person’s credit score, and developing a solid credit history helps to build your credit score — the path to better interest rates on mortgages, cars, and other loans. Other advantages of credit cards include extra incentives and bonuses, such as rewards programs, low introductory rates, and other card-specific benefits.

Here are some other advantages of credit cards:

• Convenience. Few things are more convenient than making a payment with a single swipe. Credit cards take up less space in a wallet than cash, and getting through a busy checkout line goes much faster. In fact, some retailers have gone cash-free, giving you no choice but to pay with plastic or a digital wallet (more on those later). 

• Emergency use. We all know accidents happen. Car repairs or a sick pet’s medical bill can drop triple-digit expenses on you out of the blue. Having a credit card on hand can help cover those unexpected costs.

• Theft protection. Credit card providers have extensive resources to protect users from the impact of credit card fraud. If your card is lost, stolen, or compromised, your credit card provider will manage the recovery process.

• Rewards programs. Many credit cards include rewards programs, from cash back and gas rebates to airline miles and hotel points. Using a credit card to pay for something you were already going to purchase, like groceries or a tank of gas, is a responsible way to rack up rewards.

• Travel insurance. No one wants their vacation marred by flight delays or lost luggage. Fortunately, some credit cards provide travel insurance to cover unexpected bumps in the road.

• Currency conversion. Globetrotters, rejoice! Credit cards are a convenient way to make purchases while traveling internationally. If you pay with a credit card, your card will convert the currency automatically (although it may involve a foreign transaction fee). 

Cons of credit cards

Knowing the advantages of credit cards, you can weigh their value against the disadvantages of credit cards. Credit card cons range from a brief period of inconvenience when replacing a lost card to more long-term consequences stemming from over-use. 

Consider these cons of credit card use:

• Overspending. If you’re not careful when using a credit card, you can easily spend more than you can afford. While credit cards are handy for big-ticket purchases, developing a payment plan is vital to keep from accumulating debt. Fortunately, your local credit union has advisers who can work with you if you find yourself in a tricky spot.

• Interest rates. When you fail to pay off your credit card bill, your account will accrue interest. Although many cards feature introductory offers of zero-percent APR, the average interest rate for credit cards is 21.4%, which can add up quickly if you’re not careful. Remember that credit unions tend to offer lower interest rates on credit cards.

• Debt. More than half of Americans carry some level of credit card debt by not paying off the balance each month, and getting out from under it can feel insurmountable due to high-interest rates and late payment fees. 

• Credit score damage. Just as using a credit card can help boost your credit score, overspending and accruing debt can cause that score to take a hit. Not to mention, opening a new credit card can cause your credit score to dip, at least for a few months. Lower credit scores result in higher interest rates and fewer or less favorable loan options and can even work against you when job hunting.

Alternatives to credit cards

Just because they are ubiquitous doesn’t mean credit cards are your only option. Here’s how several other forms of payment compare to credit cards. 

• Cash. When considering credit cards vs cash, you always know where you stand with cash. If there’s $20 in your wallet, you can’t afford to purchase that $30 throw pillow, no matter how cute it would look on your couch. With cash, you won’t overspend on an impulse buy. The downside? If your wallet gets lost or stolen, there’s no protection mechanism in place to return your money to you. 

• Debit cards. Credit cards and debit cards function similarly. However, because debit cards are linked to the money in your account, you can only spend what you already have. Like credit cards, debit cards offer fraud protection and the ability to freeze an account if the card is lost or stolen. 

• Digital wallets. With apps like PayPal, Venmo, Zelle, Apple Pay, Google Pay, and others, you can pay for groceries, coffee runs, and more, all with your mobile device. Digital wallets store and encrypt payment information through your credit card company or financial institution, allowing you to make payments at retailers that accept mobile payments. Apps like Venmo and PayPal also allow for peer-to-peer payments. For instance, when splitting the bill at a restaurant or sharing the cost of a Lyft. Digital wallets can also store boarding passes, concert tickets, hotel reservations, gift cards, and loyalty rewards cards. 

Further resources on the pros and cons of credit cards

Still asking yourself, “Should I get a credit card?” Check out these avenues for additional information:

• Address common issues. ConsumerFinance.gov offers a searchable database of how to manage common issues that may come up as you use your credit cards.

• Be error-free. Learn how to make corrections to your credit report through these tips from USA.gov. 

• Know the perks. Self-proclaimed “points/miles enthusiast” Danny the Deal Guru’s blog tracks the latest credit card offers.

Weighing the pros and cons of credit cards is a wise decision. And, if you find yourself putting more ticks in the pro column, be sure to consider the often industry-leading perks of a credit union credit card (like lower rates and top-notch rewards) available through your local credit union.

Did you know? 

Credit union credit cards often have lower APRs and other fees than most banks offer. While banks are unlikely to reconsider a candidate for a credit card once they’ve been turned down, credit unions will frequently re-evaluate an applicant, thanks to their community-focused service model that considers individual circumstances.