There are few forces in personal finance as polarizing as credit cards. Depending on who you ask, that little piece of plastic is the only way to get by in the modern world, or it’s root of all of society’s problems and will soon plunge us into the apocalypse.   As with most things, the truth is somewhere in the middle and, depends on how mindful you are about your habits.  Credit cards can be a boon to spending, investing, and even saving, or they can lead to serious financial problems that can quickly spiral out of control.  None of this information is terribly groundbreaking, but it can be beneficial to take a brief look at the pros and cons of credit cards.

Pro #1 – Convenience, Pure and Simple

We’ve discussed the lifesaving convenience of plastic money on the blog before. It just makes sense to have all of your money accessible with a swipe or a dip; especially in emergency situations.  It’s a wonder some businesses in the world still insist on cash only (they do exist!), especially with the proliferation of card reader technology.

Con #1 – Too Much Convenience

As we’ve mentioned before, having access to all of your money is a double-edged sword, and a lot of discipline is required where credit cards are involved. We’ve discussed the studies that suggest that spending money using a plastic card doesn’t have the same psychological heft as cash, and therefore makes each swipe easier than the last.  Instant gratification + delayed consequence = trouble!

Pro #2 – Flexibility in paying for big-ticket items

Whether it’s a gotta-have item that you just can’t live without or an actual necessity that you can’t survive without, a credit card means you are not limited by your actual bank account on what you can buy. Credit cards offer the chance to pay for something over the course of months, rather than all at once, making it easier to afford the necessities of life.

Con #2 – The Dreaded Interest

We all understand the basics of interest. The issuer of your credit card charges you what amounts to a monthly fee, a percentage of the amount you’ve charged to that card, for the use of that card.  With the flexibility that comes with a credit card comes the added cost of interest.  Any discussion about whether or not it is worth it to put a charge on your card essentially boils down to whether or not the interest you’ll be charged is worth the benefits a credit card offers.

Pro# 3 – Building Credit

Credit is one of those things that affects more of your life than you realize. The ability to take out a loan, rent an apartment, buy a house or car, even getting a job can be positively or negatively affected by a credit score.  And regular credit card use can be a quick and easy way to build good credit!  Making small everyday purchases, which lead to a manageable credit card bill at the end of the month, and then paying those off in a timely manner is the quickest way to a better credit score.

Con # 3 – Hurting Your Credit

Failing to pay credit card bills on time, however, is a very easy way to tank that good score. Too much credit card debt has a lasting effect on your credit, which can take years to rehabilitate, and remember, has a profound effect on many aspects of life.  It’s a serious consequence that should carry weight in any decision about using a credit card.

Credit cards seem great in theory, and in practice are great to have in the appropriate situations. However, they cannot be taken lightly.  Credit cards are simply one part of a measured and thoughtful financial plan.  They’re not a solution to debt.  They’re certainly not free money.  They’re simply a tool, to be used or abused.  So use them wisely and sparingly, and talk to a financial advisor about the best practices for you!