A couple pays with a credit card instead of cash at a restaurant. The server holds a card reader.

Pros and Cons of Credit Cards

8 min read

Last Updated: January 14, 2026

Table of contents

Key Takeaways

A credit card may help you build credit history, earn rewards, and manage unexpected expenses.
Credit cards may tempt you to overspend, which may lead to interest charges and mounting credit card debt if you fall behind.
Alternatives to credit cards include cash, prepaid and debit cards, and personal loans.

Often, having a credit card is part of a well-rounded financial life. Credit cards may allow you to shop online, earn rewards, and build credit history. But credit cards may also have drawbacks, especially if you fall behind on payments or carry a high balance. Before you apply for a new card, consider potential credit card advantages and disadvantages.

Credit Card	vs	Cash
Can be used for online purchases and booking travel accommodations.		Physical cash may not be accepted at certain businesses and can only be used in person.
Most earn rewards, like cash back or travel perks.		No rewards.
Typically safer than carrying cash, and offers protection from unauthorized purchases if lost or stolen.		No built-in fraud protection. If cash is lost or stolen, it's hard to recover.
Available for emergency or unplanned expenses.		You can only cover the expense if you have the cash available.
Using a credit card can help you build credit.		Doesn't build your credit, which may limit access to credit in the future.
Helps to budget and track expenses by providing a detailed spending record.		Can go unrecorded and lead to missed expenses when budgeting and planning.

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The pros and cons of credit cards

A credit card offers convenient access to a line of credit when you need it, whether that’s at the checkout counter or in an emergency. But it’s important to understand the risks, too.

Credit card pros

Convenience. Paying for purchases with a credit card is typically quick and easy. In person, just swipe, insert, or tap your card at the register. If you add your card to your digital wallet, you may even pay by tapping your phone. To shop online, you just enter your card information. If you need to buy something but your paycheck won’t arrive for a few days, your credit card may also help you bridge the gap until you get paid.

Rewards. You may earn cash back, points, or miles when you shop with a rewards credit card. When you make an eligible purchase with your rewards card, you earn a percentage back that you may redeem for statement credits, cash, and more. It's that convenient. For example, with the Discover it^® Cash Back Credit Card you earn 5% cash back on everyday purchases at different places you shop each quarter, up to the quarterly maximum when you activate.

Credit-building potential. Your credit card activity typically appears on your credit report and influences your credit score, unlike cash, a prepaid card, or a debit card. Using your credit card responsibly by keeping balances low and paying on time each month may help you build a positive credit history and a strong credit score.

Many credit card issuers offer credit cards designed to help beginners build credit history, like student and secured credit cards. These credit-builder cards typically have fewer eligibility requirements and low credit limits.

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Fraud protection. If a $50 bill falls out of your back pocket, it may be gone for good. But credit cards have you covered in multiple ways. If you misplace your card temporarily, you may be able to freeze your account until you find it. Or, if your card is lost or stolen, or you suspect your card has been used fraudulently, you may cancel it to prevent unauthorized purchases. Plus, thanks to the Fair Credit Billing Act, your liability for unauthorized use of your credit card tops out at $50, according to the Federal Trade Commission.

Travel perks. Credit cards make booking travel easy, but the benefits don’t end there. A travel credit card may offer rewards that make flights or hotel reservations more affordable. Some credit cards may not charge foreign transaction fees for purchases in another currency, which may save you a lot of money while you’re traveling.

Emergency funds. Credit cards may help you potentially pay for emergency expenses that you don’t have the cash in your bank account to cover, from costly repairs to unexpected medical bills. Just make sure you pay down the balance as soon as possible to avoid monthly interest charge.

Possible interest savings. If you pay your credit card statement balance in full every month, you may not owe interest on your transactions. Plus, some credit card companies offer low-interest rate and zero-interest promotions for new cardmembers, which may give you more time to pay off a big purchase without paying an interest charge.

Cash advance access. You may use your credit card to borrow money from participating banks, credit unions, and ATMs when you need it with a cash advance. A cash advance may allow you to borrow money against your credit limit without the trouble of applying for a loan. But keep in mind that your credit card company may charge a high interest rate for cash advances. To avoid a high interest charge, you may want to pay off your balance as soon as you can.

Online banking tools. Many credit card companies offer mobile and online banking options for managing your credit card account. An online banking portal is a helpful personal finance tool that makes it easier to track expenses, pay your bills, and manage rewards.

Credit card cons:

Risk of overspending. Sometimes, the convenience of credit cards makes it easy to spend more than you would using cash or a debit card. You may spend up to your credit limit, even if you don’t have the money in your checking account to repay your balance. Racking up high balances or maxing out your credit cards may hurt your credit score and make it difficult to manage your debt.

Interest charges. You generally have to pay an interest charge any time you carry a credit card balance into the next billing cycle. A credit card may have a high interest rate in comparison to some other forms of debt, like a personal loan. Interest charges might quickly pile up and add to your credit card debt, especially if you make only the minimum payment each month.

Annual fee. Discover has no annual fee on any of our cards, but many credit card companies charge you yearly for maintaining your credit card account. The additional cost may strain your budget, especially if you have multiple credit cards with fees.

Late payment penalties. If you lose track of the due date on your credit card bill or you just aren’t able to afford it, you may miss a payment and incur late fees. The longer you go without making at least the minimum payment, the more you may owe. Each missed or late payment may appear on your credit report and hurt your credit score. Fortunately, tools like autopay may help you stay on top of your bills.

Alternatives to credit cards

A credit card is often a convenient payment method and a helpful way to borrow money, but that doesn’t mean it’s always the right fit. At times, you might consider some alternatives.

Cash

If you value simplicity, cash may be a good option for your everyday spending. Keeping track of your spending may be easier with physical bills than with a debit or credit card. Plus, you could stick to your budget by limiting your spending to a set amount of cash you withdraw each week or month.

While cash may work well for certain expenses, it also has some limitations. You can’t complete an online transaction, book most hotel rooms, or reserve a rental car with cash, for example. You also can’t earn rewards like you would when using a credit card for your everyday purchases.

Did you know?

Even if you typically pay with cash, you may want to carry a credit card to use in emergencies or when cash isn’t an option. Discover is accepted at 99% of places that take credit cards nationwide.¹

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Debit cards

Debit cards may offer most of the same convenience as credit cards. You may use a debit card for online transactions, in person at checkout terminals, and even add your debit card to a digital wallet. But while credit cards give you access to a line of credit, debit cards connect to your checking account. So, debit cards generally won’t help you earn rewards or build credit history, and they don’t extend your spending power.

Prepaid cards

A prepaid card is a card that you preload with funds before making purchases. You may use a prepaid card in place of a credit or debit card for a wide range of transactions, including online purchases and subscriptions. When your prepaid card balance runs out, you may deposit more money into the account.

A prepaid card doesn’t require credit history or even a bank account, so it might be a helpful tool for people without bank accounts or young people learning personal finance skills. However, prepaid cards don’t contribute to your credit history. And some cards may only offer limited security features.

Personal loans

If you’re looking for a way to borrow money for something you need, you might consider a personal loan. While credit cards give you ongoing access to a revolving line of credit, personal loans allow you to borrow a lump sum from a financial institution and pay it back in installments, with interest. The interest rate on a personal loan may be lower than the interest rate on most credit cards.

Like credit cards, loans typically appear on your credit report and build credit history. However, they don’t offer rewards.

A personal loan may be the right fit for covering a specific expense, like a car repair or veterinary bill. But if you want access to credit as needed for everyday purchases or emergencies, you might want a credit card account instead.

The bottom line

The right financial tools for you depend on your unique preferences and spending habits. In fact, most people use a variety of tools to meet different needs. For example, you might use cash for your everyday spending, a debit or prepaid card for bills, a credit card for gas, and a personal loan to manage an emergency repair, all within the same month. While credit cards may not be the best choice for every situation, they may contribute to your overall financial wellness, as long as you practice responsible habits.

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