Credit cards are a great way to build credit and can provide expanded buying power. Familiarize yourself with what a credit card is, so you can benefit from using one.

Credit cards let you borrow money from a bank under the agreement that you’ll repay it by your bill’s due date or incur interest charges.

        Advantages

Some of the perks that come with paying on plastic include:

1. A credit card is safer than carrying cash. While there’s only a small chance of having lost or stolen cash returned, a credit card can quickly be cancelled if you lose your wallet.
2. A credit card can build your credit rating. Your credit card account details and payment history make up a key part of your credit profile. If you keep your account in good standing, this information will help you build up a good credit score, which could increase your chances of approval for other products such as car loans or a mortgage.
3. You can get interest-free days. If you pay your balance in full before the statement period ends, you can be rewarded with interest-free days on future purchases for a set period.
4. Earn reward points when you spend. Rewards credit cards let you earn reward points to redeem with the bank’s rewards programs for perks including flights with partner airlines, products from the rewards store or cash back.
5. You can request a charge back if you’re unhappy with a product or service. You can request a charge back through your credit card company if you have a dispute with a merchant, either in-store or online.
6. Credit cards work in any currency. Although currency conversion fees usually apply, you can use your credit card overseas to make purchases in a foreign currency. There are even credit cards that waive fees for international purchases, which could be useful if you often shop at overseas online stores or have an international holiday coming up.
7. Credit cards give you an emergency line of credit. Credit cards can be a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that arise.
8. Credit cards often have complimentary extras. Credit card features such as travel insurance, purchase protection and extended warranty insurance can save you money and give you peace of mind. Other value-adding features include complimentary flight offers, passes to some of the best airline lounges
9. You can consolidate debts and save money on existing balances. Balance transfer credit cards allow you to move existing high-interest debts to a new account with a low or 0% promotional interest rate. This can save you money on interest charges and help you pay down debt faster.

    Disadvantages

• Paying high rates of interest. If you carry a balance from month-to-month, you’ll pay interest charges.
• Credit damage. Missed credit card repayments and ongoing debts are recorded on your credit file and can impact your chances of getting a loan down the track.
• Credit card fraud. There are a range of fraud schemes that target credit cards. While you can be compensated for illegal transactions on your account, dealing with credit card fraud can still be a time-consuming and stressful experience.
• Cash advance fees and rates. Financial institutions make it very expensive to use your credit card to get cash out or make other “cash equivalent” transactions, such as buying foreign currency or gambling. Using a credit card for a cash withdrawal will attract a cash advance fee
• Annual fees. While you can often get debit cards without annual fees, most credit cards have them.  If you want to avoid this charge, you can consider a no annual fee credit card — but make sure you look at all the other features to help find a card that works for you.
• Credit card surcharges. Businesses often apply a surcharge when you pay with a credit card.
• Other fees can quickly add up. Depending on your card, you could be charged fees when you miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance transfer fees and even some rewards programs fees. If you carry a balance or don’t have access to interest-free days, there’s also a good chance interest will be applied to these charges.