Pros and Cons of Credit Cards

Credit cards can be really helpful or really stressful, depending on how you use them. They offer convenience and rewards, but also come with high interest and the risk of debt if you’re not careful.

A good way to think about them:

Credit cards are a tool. Used well, they work for you. Used badly, they work against you.

How KOHO Essential Fits Into the Picture

KOHO isn’t a bank—We are a financial service company that offers a spending and savings account with a prepaid Mastercard®.

KOHO Essential is designed to work like a no fee monthly account for most people because:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

• Grow your savings with a 2% interest savings rate on your entire balance.

• Earn 1% cash back on groceries, eating & drinking, and transportation.

• Enjoy unlimited transactions (never worry about sending money to someone again).

• Add Credit Building to help build your credit history without relying only on a traditional credit card

Pros of Credit Cards

1. Convenience and Security

• Widely accepted online and in-store

• Easier to book travel, hotels, and car rentals

• Often come with fraud protection and dispute options

2. Rewards and Perks

• Cash back, points, or travel rewards on your spending

• Some cards include insurance (like travel or purchase protection)

3. Building Credit

• Using a credit card responsibly (low balances, on-time payments) helps you build a strong credit history

• That can help with future goals like car loans, rentals, or mortgages

4. Short-Term Flexibility

• Can be useful for short-term cash flow gaps if you pay the balance off quickly

• Gives you time between the purchase date and statement due date

Cons of Credit Cards

1. High Interest if You Carry a Balance

• Typical credit card interest is often very high

• Carrying a balance month to month can make even small purchases much more expensive

2. Easy to Overspend

• It doesn’t “feel” like cash, so it’s easy to lose track of spending

• Minimum payments can create the illusion that your debt is manageable when it’s actually growing

3. Fees

• Some cards charge annual fees

• You can also see late payment fees, cash advance fees, and foreign transaction fees

4. Credit Score Risk

• Missed payments, maxed-out cards, and multiple new cards can hurt your credit score

• If you’re not organized, credit cards can make your financial life more stressful, not easier

When a Credit Card Might Make Sense

A credit card can be useful if you:

• Pay your full balance on time every month

• Want to earn rewards on spending you’d be doing anyway

• Are building your credit and feel confident you won’t overspend