Contents
A credit card is a card with an already set limit that banks or financial institutions loan us. It includes facilities such as buy now and pays later, or the card comes with a scheme that allows us to avail of many facilities for free if we use the credit card for regular payments.
Credit cards, over the past 15 years, became very popular in India as it was part of digital evolution and encouraged more people to use these to make payments for their day-to-day expenses.
At present, credit card has expanded their role in encouraging digital payments by offering cards that on every amount will give the user some ‘points’ which later can be use to buy things or services. Even different credit cards are available for specific purposes. For instance, if you often travel, you can request your bank/credit card company to issue you a card that will avail you of benefits like discounts or coupons while traveling or booking tickets. Although there are a lot of credit card offers, a few of the benefits are below.
Benefits of using credit card
Having many credit cards, the credit card is use for specific purposes and gives specific benefits. For example, having many cards, one for shopping, one for travel, and one for regular use. They can benefit in the following ways-
- Keep using credit cards (within limit) to pay for online shopping and get points for each payment.
- After a certain payment, the points get accumulated, and we can buy using those points.
- In lockdown during the second COVID-19 wave when there was a shortage of oxygen cylinders. (CRED app, which allows us to make payments with credit card hassle-free, also gives points for every payment which later can let us use those points.)
- CRED app users helped with those collected points to buy oxygen cylinders for the needy. In this way, credit card points benefit the user.
Credit cards known as short-term loans When we swipe our credit card for making payments, we are not actually paying it, our credit card issuer is paying it for us and later at the end of the month, we have to pay to credit card companies/banks. ‘Buy now, pay later scheme have made credit card popular.
- It means we can buy now whatever we can buy them at the end of the month can pay.
- It allows us to increase our appetite to own things.
- This flexibility can make us use the money in a better way.
Available loans to credit card users When we pay credit card bills on time not leaving any amount behind on time or before time, it builds the credit history of users. Credit history is a record of an individual which allows banking access if the user who has applied for a loan is fit for the loan or not, are they able to pay all their dues before, or will they be able to pay future dues?
- When we pay timely credit card bills on time, then our portfolio gets credit points and ratings.
- These points make our profile looks good, which later helps us to convince banks to give us loans.
- As all the credit card dues have been timely paid, then it gets easy to get loans in the future.
Use the money to circulate in the market If you have money still use a credit card for making payments, we can use that money to buy shares or deposit in the bank so that we can earn some extra penny and at the end of the month can pay all our dues to credit card companies also earn extra.
- But this should be done only with caution, those who have sound knowledge of the market can do this.
- Those who have money-losing, which won’t hurt them, can use this way.
- As we get an interest-free period, what’s the harm in using it wisely.
Provide safety against fraud When we use a credit card for payment, it doesn’t deduct from our bank account our credit card companies pay them on our behalf of us and that is how it helps us to detect fraud.
- We can track the person who has tried to steal our money or tried to fraud us.
- We can cancel a card when it gets stolen.
- Also, we are not liable to pay the amount if someone tries or uses our credit card.
Read about: Credit card scores.
Best ways to use credit cards
We should all use a credit card in a wondrous way and reap its benefits. Even if you’re a student or housewife, you all should get a credit card issued. Smart ways will the least possible risks to getting credit cards are-
- Get a zero yearly charge card with the lowest credit limit, it can be ₹10,000/₹1,00,000 whatever is your appetite.
- Only buy things using a credit card for which you have money now or can pay later.
- Pay all the amount within due time, it’s best if you can pay before time. Don’t even leave a single figure left.
- Using some intermediary application while using credit cards, not only gives benefits of credit points, it also makes hassle-free payment in the least possible time.
(Don’t)s while using credit card
Excess of anything is not good, like this using excess credit cards can affect negatively too. Things which are must consider while using a credit card-
- Before getting issued credit cards, always carefully refer to the whole terms and conditions which are applicable.
- If you have multiple credit cards, always pay high internet cards on priority.
- Don’t open cards willy-nilly just like that or for fun, it will impact your credit profile negatively.
- Credit cards have high hidden interest, if you fail to pay on the due date you might get charged with higher and higher interest.
- Many cards offer flexibility to only a limited extent.
- Having many card lines can also impact you as these can actually lower your credit scores.
- Apply for a card and use it for one year or so to not find it beneficial, then you should cancel it.
- Never use a credit card to withdraw money from ATM.
There’s no magical number of credit cards that one should have, it’s a subjective matter. It may be a tool for financial management, but if not used properly it can easily get converted into a debt trap.
There’s no magical number of credit cards that one should have, it’s a subjective matter. It may be a tool for financial management, but if not used properly it can easily get converted into a debt trap.
A credit card is great if we use it wisely and pay all the dues in time. Let yourself use the card, don’t let the card use you. It is a blessing for those who use it nicely and a nightmare for those who make it a debt trap. Limited and proper use of anything is always fruitful.
I love to write and explore different writing style. On a constant loop of learning to write and writing to learn. Know me through my words. Currently studying chartered accountancy and working on my passion.