Having a credit card is very convenient. It offers users with a line of credit that one can use each month, up to a fixed amount. For ad hoc purchases and flexible credit usage, credit cards are a godsend.

However, the danger of credit cards lies in the debts. If, for any reason, a person fails to pay back the amount at each billing cycle, the interest rates can be pretty high, and accumulates into a huge debt quickly.

If you are ever considering between applying for a credit card, or taking out a one-time personal loan from a moneylender, here are some things about credit cards you should consider:

• Easy and convenient

Credit cards are easy and convenient. They are widely accepted online and in stores, and give you the flexibility to pay for large purchases while protecting your money in the bank. Gone are the days where cash is king – cashless is the way to go now! With most smartphones now, you can even load your credit card into your phone and pay directly by tapping your phone.

• Impact on your credit score

One thing to remember about credit cards is that it affects your credit score. From the time you enquire about applying for a card, to how you use your card, these affect your credit score. So, even while you enjoy the conveniences of a credit card, it is crucial to keep in mind that your actions will affect your future prospects of getting a loan. If you want to get favourable rates on any loan from a moneylender in Singapore in the future, now is the time to use your credit card wisely to ramp up your credit score.

• Rewards and bonuses

One of the most attractive things about credit cards are the rewards and bonuses users get to enjoy. Ranging from cashbacks to exclusive deals, every credit card has their own perks. That is the reason why some people sign up for so many cards. But don’t forget – having an excess of credit cards can be dangerous if you overspend or forget to pay a bill on any of them. While deals are good to have, it is best to stick to only a handful of credit cards.

• High interest rates

For all their benefits, credit cards have one main pitfall: their high interest rates. Miss one payment, and you will incur a significant debt due to the interest rate. Anyone who owns one or more credit cards needs to be careful not to overspend, as this will be highly detrimental to your financial situation.

Comparing credit cards to a personal loan, credit cards may seem very attractive. However, if all you need is a one-time sum of money to fund specific things, then a personal loan might be more suitable. There is a lower risk of snowballing debt with a single personal loan, and they are typically short-term loans with lower interest rates.

There is no one better choice, but making the wise choice involves taking into account your own spending habits, needs, and financial situation.