What Are the Negative & Positive Perspectives of Using a Credit Card?

Poor spending discipline makes credit cards more risky.

Poor spending discipline makes credit cards more risky.

Credit card usage is a normal part of finances for the typical household. The average American credit card balance in 2011 was $6,576, according to CreditKarma.com. Some people focus heavily on the freedom credit cards give you to buy what you want now and pay later. Too much use of credit cards, though, can lead to financial problems.


A main benefit of credit cards is the opportunity to buy something you need even when you don't have the cash. Unexpected car repairs, medical bills or broken appliances can catch you off-guard. Without adequate savings, you are either stuck using high-interest payday loans or a credit card. The credit card offers more flexible repayment along with a lower interest rate.

Build Credit

A common misconception is that avoiding credit cards is a good way to build an excellent credit score. In fact, getting a credit card early helps you establish borrowing history. Parents can help their teens and young adult children by cosigning for a card. If the young cardholders make once-a-month purchases and pay the balance right away, it will improve their chances of getting approved for credit on larger purchases down the road. Payment history accounts for 30 percent of your FICO score, according to MyFICO. A good score helps you get lower interest rates on home and auto loans at some point.


The responsibilities you take on when borrowing money are a source of negative feelings about credit cards. You typically make payments each month. Minimum payments are usually 2 to 4 percent of your balance. If you pay only your minimum, you end up paying hundreds or thousands in interest over time. If you make only 2 percent payments on an initial $1,000 balance at 18 percent, you pay $1789.02 in interest alone during an 18-year repayment, according to Nationwide. In short, it is costly to owe a credit issuer money.

Credit Risks

Another negative of using credit cards is the risk of overuse. If you use a high percentage of your available credit, your credit score drops, since 30 percent of your rating is based on amounts owed, according to MyFICO. FICO indicated in early 2011 that people with excellent credit scores usually use less than 10 percent of limits. Plus, overuse makes minimum payments higher, limiting your cash flow and increasing your potential for late payments.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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