3 Disadvantages Of Using Credit Cards And How You Can Work Around Them.

Credit cards are one of the things most people love to carry around. Are you short of cash? Nota problem. ​A credit card can fix that. However, on careful study, one might find out that there are downsides to keeping a ​credit card​.It is better to know about them all before you get one.

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For small businesses, credit cards provide resources owners need when they don’t have the cash. However, since small-business credit cards have been excluded from protection under the Credit Card Accountability Responsibility and Disclosure Act of 2009, better known as the Credit Card Act, small businesses must be careful and know the dangers this type of credit can pose. Business owners should know when and where business credit cards are best used and best avoided.

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The Credit Card Act does not provide as many protections for business credit cards as it does personal cards. Because the business owner is still personally responsible for any debt incurred, it is more sensible to use a personal credit card for purposes such as funding or any expense that won’t be paid back immediately. If a personal credit card is used for such expenses, the Credit Card Act will provide the protection necessary when the business is carrying a balance.

Business credit cards are usually charged higher interest rates compared to personal credit cards. Interest rates on business credit cards are also relatively high compared to loans and other types of finance. If a business allows interest to accrue, the cost of using the credit card will be high. High interest rates, late fees and high annual fees can make the business credit card an expensive option for financing costly purchases.

Any business credit card comes with the risk that employees might abuse the company card by charging personal items. If this happens, it could have dire consequences for the business because business credit cards have fewer protections than personal cards. To protect against this, employees should be authorized only to use cash, as it is easier to manage and oversee how and where employees are spending company money when they’re spending cash.

A small-business owner is the sole proprietor and therefore has ultimate responsibility for the business’s credit. Most business credit cards require a personal guarantee, which means the business owner must submit her Social Security number and previous credit history to qualify. If the business’s credit card isn’t used wisely, missed or late payments can harm the guarantor’s personal credit history.

The Temptation:

Now, the rule of ​credit card is to pay the bill at the end of the month which means you can shop even if you’re cashless. In most case, people don’t feel the cash leaving their accounts. Thus, they spend twice the amount they would normally spend and it is not until the bill arrives that they know the trouble they are in. This happens a lot with new ​credit card users but can be kept in check if you fix a monthly amount you want to spend and stick with it.

Interest:

Every cardholder has the opportunity to pay the total money spent using ​credit cards by cash at the end of every month along with the service charges. However, not every individual can or wants to pay the bill at that time. Some people delay it, which makes the interest valid on the payment and the more time you take to pay off the amount, the higher the amount becomes.

Risk of Debt:

Now, if you continue with not paying in full, there is a significant chance you’ll incur a big debt. This debt will give you issues bigger than financial ones. ​Debt is a major cause of stress and depression. It holds you back from reaching success and bigger goals since you are stuck in the cycle of just paying one debt after another.