Credit cards, when utilized correctly, can be beneficial to you; when used incorrectly, they can harm your credit score over time, potentially stopping you from reaching your long-term financial goals.
The following is a summary of some of the risks associated with credit cards-
Debt trap. Interest rates on credit card balances are common. You'll have to pay additional interest every time you add to your debt and don't pay it off in full within the billing cycle. It may be tough to break out of credit card debt as a result of this.
Term changes. One of the risks with credit cards is that the issuer might change the conditions of the card agreement without your permission. Your interest rate and grace period may change without notice from the card issuer.
Account closure. The creditor may eventually close your account if you don't pay your credit card bill. Charge-off accounts are what they're called. Charge-off accounts can be a pain for years, in addition to having a negative impact on your credit score.
Risks of credit. Another disadvantage of credit cards is the possibility of overuse. According to MyFICO, 30% of your credit score is based on amounts due, so if you use a large percentage of your available credit (more than your credit card limit), your credit score will suffer.
Theft of a credit card. There's a chance you've been a victim of fraud, though it's not particularly prevalent. With technological advancements, it is now possible to clone a card and obtain access to personal information, allowing another person or entity to make purchases on your card. Check your statements for any strange purchases and notify your bank right once if you suspect card fraud. If the fraud is verified, banks will normally waive charges, so you won't have to pay for purchases made by the thief.