6 Benefits You Can Derive Using Your Credit Card

 

6 Benefits You Can Derive Using Your Credit Card

 For the common man credit cards are not only fascinating but also bring out a feeling of fear.

And I can totally relate to that.

With all those horrible stories of credit card debts and recovery tactics, most people are happy staying away from this unknown devil.

But are credit cards some unknown devil?

Can they be tamed to benefit us?

Can we leverage them to work in our favour?

In this blog, we are going to put the credit card under a microscope and look closely into 6 benefits that we can derive from using the credit card in India.

So, if you already have a credit card or are contemplating taking one, then this blog will help you understand how you can use your credit card to maximize your financial health.

Yes, we will be talking about the positive side of using credit cards in India.

First of all, we need to think of a credit card not just as a plastic rectangular-shaped card or even plastic money.

Your credit card is more than that.

It’s a secret locker in your hand with money inside it.

Your credit card can help you save money, earn perks and most importantly build your financial reputation. Most of us don’t know what our actual financial reputation is in the marketplace. But surprisingly, when you go to get a loan from a bank, your banker will know every single detail of your financial transaction. Based on that he will judge whether the bank will give you a loan or not.

It’s high time we became smart and learned how to use our credit cards smartly and transform them from just a piece of plastic into a financial tool that works for us.

I can hear some of you thinking, that navigating through the world of credit cards can seem confusing and stressful. But if you can have control of your emotions and feelings then instead of just working to pay your credit card bills, your credit card will work to help you become financially smart. It will become a two-way game.

It's high time to unlock the advantages of credit cards, secrets of maximizing the benefits hidden within that little piece of plastic called a credit card!

So, let's dive right into the nuts and bolts and break down the basics of using credit cards in India in a way that can provide more money leverage in your pocket and less stress on your mind.

What is a Credit Card?

Here is one of the many credit card meanings in simple language - a credit card is a financial tool in your wallet with a certain money limit that allows to you buy now and pay later, often after about 30-50 days.

6 Advantages of Using Your Credit Card

1. You have easy access to immediate fund requirements.

Say, things are going fine for you and then suddenly you wake up to find that you have an urgent requirement of cash to pay someone. It can be a medical issue or some function where you have to buy a gift or any of the many emergency requirements.

This is when you can use your credit card to fulfil those emergency money requirements.

But…

Even though you can withdraw cash from your credit card from an ATM, it is not recommended.

Avoid as much as you can. Don’t withdraw cash using your credit card because the interest rates on cash withdrawals from credit cards are super high. Instead, swipe your credit card to make payments.

If you want to keep your credit card usage smooth and hassle-free make sure that you pay your full due amount before the due date. Don’t ever fall into the trap of paying the minimum amount option available. You may end up paying almost double what you have spent.

2. You can avail of EMI options for expensive purchases.

If you have a handsome credit limit on your credit card that allows you to purchase an expensive product or a service then you can avail of this facility offered by the credit card company. It allows you to convert your high-end purchase into smaller monthly payments instead of paying the bank full bill amount.

Once you buy that expensive product, the bank will provide you with an option to convert your high expenditure into manageable monthly instalments. You may get to see various EMI options like - for 12 months, 24 months or more.

From the available options, you can select one and start paying the amount over that extended period.

Again, this will depend on the kind of EMI option you select. The bank will charge you interest to use the EMI facility. The EMI amount may not be as per your paying capacity so you may have to stretch a bit to pay your EMIs.

3. Interest-free period to pay your credit card bill.

An interest-free period is the duration between your purchase date and your billing cycle. During this period the bank doesn’t charge you any interest on your purchase or credit card transaction. Many banks offer interest-free periods ranging from 20 days to 50 days.

But you need to deeply understand and use this facility very carefully to derive the most benefit out of it.

As soon as you have your credit card delivered find out what is your billing cycle. This simply means when will your monthly bill be generated?

Most credit card companies have a billing cycle anywhere between the 19^th to 25^th of every month.

Let’s say your credit card billing cycle is the 23^rd of every month. If you make a purchase or a credit card transaction on the 24^th you will then be awarded an interest-free duration till the next month 23^rd. But if you make a purchase or do a transaction on say, the 19^th then you will only get an interest-free duration of 4 days. This is because you made your purchase closer to the billing cycle.

Therefore, it’s best to make your purchases immediately after your bill is generated to enjoy a longer interest-free duration.

Also, make sure you make the full payment of your credit card bill 2-3 days before the due date. This will be recorded in your payment history and every bank in the country will come to know that you are a good paymaster.

Soon you will be getting calls from other banks offering you their credit cards with higher limits. Whether you should take it or not that is a different story.

Consider your credit card as a money bucket. Whatever you take out during the month, make sure you fill it back before the date is due.

Let’s take a pause and focus on one very important tip while using a credit card.

Remember one thing – only make purchases of products using your credit card for which you have your own money to buy.

Let me explain:

Say, you want to buy a new smartphone that costs thirty-thousand rupees. You have a credit card with enough limit and you say that you’ll use your credit card to make the purchase.

But before you swipe that card of yours, ask yourself – Do I have enough cash in my bank to buy this smartphone without using my credit card?

If the answer is yes, then you can go ahead and happily swipe your credit card. Because you know that when your credit card bill arrives you will have the money to pay it in full.

But if your answer is no, then things might get a bit expensive.

Here you have two options –

a. To convert your expensive purchase into EMI options

b. When the credit card bill arrives after your interest-free period is over you struggle to arrange the money to clear your bill or you pay the minimum amount due.

In the first case, you have to pay extra for the EMIs.

In the second case, you have to face unnecessary stress and seek out people who will lend you money. Then they will follow up with you to return their money.

If you decide to pay the minimum amount due then you are unknowingly walking into a vicious debt trap that almost never gets paid. The bill amount keeps showing up every month without decreasing. Your credit card limit will also be reduced because you have not yet fully paid your bill.

If you think you can cough out the EMI amount every month without much stress then you can opt for option (a).

I strongly suggest that you don’t go for option (b) even if you are sure that you can manage to arrange the credit card bill amount. This is a sure way to avoid credit card stress.

So, if you were wondering:

Should I use a credit card for everything?

Should I use a credit card to pay bills?

Then I trust you must have got some clarity on it.

4. Improve your credit score (CIBIL score).

When you make a purchase or do a transaction using a credit card you create what is called – your payment history!

And, do you know that credit rating agencies are monitoring all your purchases, money transactions and payments made?

Even if you don’t know, they have an eye on your financial transactions.

So, if you are making your credit card payment on or before time you are in the good books of the credit rating agencies because you are building a good credit score for yourself. The credit rating agencies give scores and rate you based on your financial history.

How will this high score help you?

The credit rating agencies share your CIBIL score with banks and financial institutions. So, if you approach a bank for any kind of loan, they will first check your CIBIL score. They will want to know if you have been paying all your dues on time or have defaulted in payments. If your credit score is below the minimum required level your loan application will be rejected or you may be charged higher interest rates.

It pays to be in the good books of credit rating agencies because having a good CIBIL credit score will help you raise finance from the market. This is one of the advantages of credit rating.

5. You have a record of all your credit card expenses

Your credit card documents all the transactions made using the card. This is in a way good. You get first-hand information or a snapshot of where you have been spending the money.

Based on this information you can make your future financial decisions about whether to discontinue some expenses or cut down on them.

If you get into the habit of going through your credit card’s monthly bills or snapshots you can be in control of your expenditure and you can make sure that your credit card bills don’t become a nightmare for you.

6. You earn credit card rewards

To attract their customers credit cards offer a variety of bonuses and attractive offers. One such attraction is reward points. All credit cards offer reward points on your purchases. If you collect enough reward points you can exchange them for a product or a service.

But beware!

Don’t exceed your credit card spending just because you want to earn more points.

Points are just added benefits which are more like small changes.

Remember, credit cards are offered to you to spend. The more you spend the more the credit card companies benefit. So instead of listening to credit card companies use your wisdom before swiping that card of yours.

With your financial wisdom, you will also benefit and the credit card companies will also be happy with you.

This is called a win-win situation!

Conclusion:

Even after knowing the advantages of using credit cards in India, it is not very easy to believe that yes, credit cards can be beneficial.

The question still lingers in mind:

Is it good or bad to have a credit card in India?

Well, I am no one to advise you on that.

I just want to ask you one question – what do you think? Should you own a credit card or should you avoid it?

I agree that there are a lot of advantages and also a lot of disadvantages to using credit cards. In this blog, I have discussed 6 advantages. I can also write a blog explaining the disadvantages. You too can come up with a ton of disadvantages. So, even credit cards have two sides to it – the good side and the stressful side.

In the end, I would like to summarize the positivities of using credit cards in India that we have discussed above.

In today's financial landscape, and ever-expanding consumer market, owning a credit card isn't just about buying stuff—it's an opportunity to leverage a powerful tool for our present and future financial management and earning potential rewards on the side.

When handled wisely, a credit card can unlock a bundle of benefits that are beyond mere convenience. They offer perks, rewards, and the chance to build a strong and healthy credit history.

The only way you can maximize the advantages of using a credit card and sidestep the potential pitfalls is to understand how to navigate the nuances of credit cards.

So, the next time you decide to swipe that credit card of yours keep in mind the discussed benefits and use your wisdom to elevate your financial prowess.

 

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