Credit has both pros and cons. Here are some of the advantages and disadvantages of credit:

  • Ability to buy items immediately
  • Online shopping is convenient and easy
  • Don't have to carry the exact amount of cash
  • Creates a record of purchases
  • Consolidates bills into one payment
  • Widely available with competitive offers
  • Credit cards that offer rewards can help you get more from your spending, such as gift cards and travel insurance
  • Delays  payment – some credit cards offer extended interest-free repayment periods (see cost of credit)

  • Cost of credit can mean a higher cost of items (interest rates, fees and charges)
  • May include additional fees including penalty fees (eg early exit and missed repayment)
  • Financial difficulties may arise if you lose track of how much you spend each month
  • Can lead to increased impulse buying
  • All credit history is recorded and kept for a period of time. If you have a bad credit history, a lender may refuse to lend to you.
  • You may be in debt for a long time (eg home loan)
  • Obligation to pay – if you can’t work, it can become difficult to meet repayments
  • Can get into too much debt

If you use credit wisely, you’ll be able to make the most of the benefits and avoid many of the disadvantages.