Credit Cards Delusion
Advertising Disclosure
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Cards Delusion

By
Add to Favorites:
Credit Cards Delusion
August
30

Though credit cards have become part and parcel of the modern society, there are customers who still hesitate what is better - apply for one or more enticing credit cards or get a traditional loan which is basically considered to be older and so safer. Up till now these two forms of lending money have co-existed perfectly well, giving people both, their typical benefits or drawbacks.

So, what are the personal considerations customers are guided by when choosing inflexible and limit fixed loan or a reward credit card with no annual fees?

Somehow it seems that the choice is predetermined and is evidently in favor of a low interest and high-limit credit card. Such a profitable credit card application does look winning against a loan which you are supposed to spend, repay with a fixed interest and never re-borrow any part of it.

On the other hand the fixed rate associated with a traditional loan reduces the risk of accumulating credit debt and lets you feel more or less secure. You know how it happens with credit card companies which raise the credit card fees  and rates on all your credit cards once you are delinquent on just one of them. Universal default - that's what they call it.

Now, what do people usually choose - stability and safety with access to only a limited amount of money or a great risk of debt and even bankruptcy with flexible credit card programs?

The research shows the choice depends mainly on the purpose of borrowing the money and, unfortunately - not on the spending habits and self-discipline of the borrower or credit card applicant. As things are today, most choose for credit cards.

It is bitter truth that most credit consumers are still more concerned with the profit they get out of their loan or line of credit than with the way they carry their paying obligations. And as far as credit cards are concerned, customer's obligations go much farther as well as their financial stability is easier to shake.

Credit cards have one big trap which is a serious drawback. They give you the impression of having free and unlimited amounts of money, leaving behind the fact that one day the credit will have to be repaid with interest.

One day... that's it. The undefined deadline of the revolving credit you have on your Visa or MasterCard can take you down into a credit card debt  spiral and the more you linger with paying off your balances, the deeper down you go.

We do not insist, however, that a similar situation is not likely to happen when you apply for a traditional loan. It is true that the size of the loan is fixed and no part of it can be re-borrowed, thus putting you within strictly defined limits. It means that what you spend - you lose it. It is also true, that a loan offers a fixed rate, thus guaranteeing you a certain, invariable cost of the credit. 

All these features do not rule out the fact, though, that if a customer is late or skips his monthly payments, he or she will not be punished with increased interest rates or late payment fees. A loan functions just like a credit card with the only exception that it lacks flexibility.

That's why, if you are not sure in your ability to pay your outstanding balance every month, you'd better apply for a loan rather than credit card, that's for sure. Unfortunately, the capability to meet one's credit card obligations has escaped the minds of most customers so far.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

5 Reasons to Get the Capital One Venture Miles Rewards Card

By Herbert Moore, Posted: January 18, 2017

If you’re looking for a great travel rewards credit card—one that offers unlimited earning opportunities, flexible redemption, and lots of perks—look no further. This card from Capital One has you covered. Continue reading

Credit Card Tips For Holiday Shopping 2016

By Herbert Moore, Posted: November 23, 2016

November and December are the busiest months as gift shopping reaches its peak. People rush around looking for the best gifts and the best deals leaving a lot of money in the shops. Holiday season may force you to go over the household ... Continue reading

Credit Cards to Save More on Holiday Shopping

By Herbert Moore, Posted: November 22, 2016

Discounts and special offers are available all year round. Werther you are a bargain hunter or an impulse buyer, make sure you check online discounts and special offers. Also, if you are a cardholder, see if your credit card opens the door ... Continue reading