Credit Cards: Meaning, Advantages and Disadvantages Essay

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Credit Cards: Meaning, Advantages and Disadvantages

What is the meaning of Credit Card?

A credit card can be defined as a card (usually plastic) that financial institution issue to their customers so that they can access credit facilities. The card holder can make payment on credit at some point of sale.

Credit cards incur some interest which starts a month after the payment was made. Most banking institutions issue these cards to facilitate an increase in revenue and customer loyalty.

The cards are prevalent in the world as many people prefer using them due to some of the advantages that have. Below are the advantages and disadvantage of the use of these cards.


1. Enables the holder to pay on credit. This card enables the cardholder to make payment at the point of sale even when they don’t have money in their bank account.

2. Helps in handling transaction disputes. Most institutions that give credit cards will come to your rescue when there is disputed transaction.

3. The card is convenient to use for large amount of moneyUnlike the use of cash, which limits the amount you can pay; the credit card can be used to pay large sums of money with no limitation.

4. Helps in accessing instant loans. When you run out of cash and you don’t know where to get some money, a credit card will help to get a short-term loan.

5. It’s light to carry around. The weight of the card is negligible hence you will conveniently when travelling.

6. Helps in tracking your credit transactionsYou can get the transactions you have made by requesting for a statement, hence clarifying where you have doubts.

7. Increases customer loyalty. The customer tends to love a place they can get credit facilities. This means that they will remain loyal to the financial institution.

8. Helps the customer to get Discounts. Many credit card institutions offer discounts to attract people to use their cards. The discount is based on the amount you are purchasing.

9. Provides security from theftCredit cards cannot be used by any other person without the holders’ permission making it difficult for your money to be stolen.

10. They help in time saving. You don’t have to waste time going to the ATM to withdraw money to make a payment.


1. They are prone to fraud. Many people have had their cards hacked and large amounts of money added to their accounts.

2. Promotes impulse buying. As long as you have the card, you are prone to buying what you had not planned for.

3. Convenient for the literate in the society. The card is given to the rich and the literate living out the poor and the illiterate.

4. Can only be used in selected points of saleThe cards are not accepted in all points of sale meaning you will be inconvenienced is some shops or supermarkets.

5. They charge some interest on the card. This means that you will have to pay more than the amount you used.

6. There are increased chances of financial institutions losing money. If the customer is unable to pay the debt, the financial institution can incur losses.

7. Promotes bad credit. Since one can access loans instantly, many people may take too much money that they can’t be able to pay in/on time.

8. More cost in case it is lostWhen you lose the card, you will have to pay some amount of money to get a replacement.

9. Used to pay only large amounts of money. It’s not suitable for payment of a small amount in your neighborhood shop.

10. Promotes excessive use of money. Since you cannot see the money being depleted, there are chances that you will misuse your money thinking that you still have more.

Conclusion: Credit cards are good to use but one has to be careful when doing so. Keep it safe and ensure nobody knows your PIN number to safeguard your money.

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