- A credit card may be the easiest way to establish credit for the first time. Credit cards are readily available to young people such as college students, and the responsible use of a card allows the user to build a favorable credit history. This can benefit users in the future when they attempt to obtain financing for big-ticket items such as homes or cars. Unlike with some types of loans, first-time users typically do not need a co-signer to obtain a credit card.
- Credit cards are a form of unsecured debt, meaning the user does not need to put up personal property for collateral. This differs from mortgage and auto loans, which are secured debt obligations. If the borrower defaults on the loan, the lender has a legal right to take back its property through foreclosure or repossession. With credit cards, the issuer has no legal right to the user's property unless it wins a judgment through a successful lawsuit. Card companies normally resort to methods like hiring collection agencies before pursuing legal action.
- Unlike home mortgages, car loans or unsecured personal loans, credit cards do not have a specific loan term for when the debt is retired. Credit cards are a form or revolving debt, meaning the user can carry the debt over from one month to the next and pay only a minimum amount, which is based on the total outstanding balance. In theory, the user could continue to carry the debt for the rest of his life.
- For some people, credit cards can pose a higher financial risk than other forms of credit. Because they offer convenience and ease of use, it can be tempting for users possessing poor spending habits to fall into the trap of "buy now, pay later" as their debt continues to mount. If the user is not able to manage the credit card debt, it could reach a point where she may need to file bankruptcy to relieve the excessive debt burden.
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