Question

Tamiko will use her credit card to purchase shoes online. The cost of the shoes is $98.75. She has $85.00 in her checking

account. Advantages and disadvantages for this payment method?

Answer 1

Advantages:

-You are able to purchase something without having the total amount in cash.

-You are able to pay a purchase in several installments.

In the situation you can see that Tamiko doesn't have enough money in her checking account to buy the shoes but she can do it using the credit card.

Disadvantages:

-You have to pay interests on the purchases made.

-You can end up with a high debt because you might spend a high amount of money that you are not able to pay back.

Tamiko will have to pay interests on the purchase she made increasing the amount of money that she will actually spend on the shoes and if she uses the credit card all the time she might accumulate a debt that she is not able to pay back.

Answer 2

The advantages and disadvantages of paying with a credit card in the case named are:

ADVANTAGES:

1. Tamiko can acquire the shoes despite she hasn't the money in her account.
2. Securely her bank gives her points or other benefits for buying with a credit card, that in another occasion can enjoy in another product or service.
3. Buying with a credit card improves her credit history to acquire in a future higher credits.

DISADVANTAGES:

1. How she hasn't all the money in her checking account, she can't pay all the cost in the first fee, then she must pay installment interests.
2. The installment interests used to have higher percentages than another credit, reason why the cost of the shoes is actually higher than $98.75.

Explanation:

Although you can see that the purchase with a credit card has 3 advantages and just 2 disadvantages, the best form to purchase with a credit card and having the benefits is pay all the amount in the first installment, in this form, we don't pay installment interests and will acquire points, improve our credit history and will have a product or service at least 15 days before to pay it.