Why should I have a Credit Card? Everyone has this question before having a credit card. After getting one, everyone wondered why I didn’t have it earlier.
What is a Credit Card?
A credit card is a small piece of plastic with a magnetic strip containing a unique identity number provided by a bank or financial service. Every bank has different features as per the card you have. Credit cards allow you to borrow some money allocated to your account which can be used for purchasing, recharging your mobile, paying electricity bills, etc. Credit cards are different than Debit Card. Visually both look the same in shape and size. For the credit card, a bill is generated at the end of the month which you have to pay before the due date. Some credit cards have an annual fee, which can wave off if you surpass a certain spending limit.
Considering the variety of customers there are different types of credit cards. The difference is in the limit of the card, features, and offers.
Why should I have a Credit card?
There are a few main reasons to have a credit card. First is getting a loan of a small amount without paying any interest charge. Second generating or building your Credit score. .There are some times or places that come into our lives when we don’t have enough money to spend. Then credit cards let you borrow some money without any additional cost for a certain period. The credit card allows you to buy something or pay for your food bills, electricity, phone, and gas bills.
Why should I borrow money if I have enough money to spend?
This question will pop up in your mind, which is obvious and logical. But we have the right answer for that. When you borrow money which means you use credit cards for your spending, you will get some time to repay that amount without any interest charge. Most likely to get needful items in your house and your life such as Mobile Phones, refrigerators, ACs, a television, and other electronic items, groceries, internet, shopping, and food bills.
To avail benefits of cashback, discount, and no-cost EMI you will need a credit card. Online shopping sites like Amazon, Flipkart, and electronic stores like Croma, and Reliance Digital also provide a no-cost EMI option on Credit Cards.
What are the benefits of Credit Cards?
Use Money Without Intrest
When you need some money to buy expensive stuff for yourself or need to purchase some needful thing or need to pay bills in an emergency then you need to ask your friends to lend you some money. Sometimes we take money on interest. Instead of that use the Credit Card to pay for stuff without any interest. You will get a 15 to 20 days (it may vary depending on your Credit Card provider) period to repay the amount.
Credit Score
When your credit card bill is generated you pay the bill before the due date. Every month you use a Credit card and pay the bill without any delay then it will generate a Credit Score against your PAN number. Not only Credit cards but any authorized loan you take and repay, your Credit score is generated.
If you don’t have a Home Loan, Car Loan, or any other personal loan then your Credit Score is Zero. Credit Score helps banks or any financial service to understand your loan repayment capability. The biggest loan a person can take is a Home Loan. Here the Credit score plays a small part. If your Credit score is more than 700, then 0.5 – 1% may be subtracted from the interest rate of the Home Loan depending on the bank or financial service.
Try to keep your first card active for a longer period to maintain your credit score.
Lounge Access
When you travel to a different place from an Airplane, sometimes you have to wait at the airport if the flight gets delayed or you have a connecting flight. You can get free access to the Lounge where you have a comfortable space to sit and relax, complimentary drinks, food, and wi-fi to complete your last-minute work. Not all credit cards have this feature, you have to check with your card service provider before accessing the lounge.
Cashback
At the end of the month, your credit card bill is generated which you have to pay before the due date. Nowadays we use payment apps to give cashback if we pay Credit card bills through their app. Amazon Pay, Google Pay, Paytm, Phonepe, and CRED are some of the apps.
Reward Points
Every time you use credit card payments, you will earn some reward points. Depending on your service provider and the amount you spend you will earn reward points. For example, if you spend Rupee 5000 then for every 100 Rupee you get 1 point. After a certain period, you can redeem these collected points to recharge, pay shopping bills, or hotel booking. So always remember to check the reward points from the mobile app or web portal of the service provider.Â
No-cost EMI and Offers
Shopping portals like Amazon, Myntra, Ajio, Flipkart, and some brands allow you to buy things on EMI. If you use a Debit card for EMI, you have to bear additional charges against the EMI process. But if you use a Credit card there are no additional charges.
Billing Cycle
When you use credit for your spending, you will get a bill at the month’s end or in the middle of the month, depending on the option you have chosen while getting the credit card. A statement is generated containing the list amount paid using a credit card. You will get an email and SMS notifications about bill generation.
You have a period to pay this bill. Your credit card provider will give you 21-25 days after statement generation to pay the bill. Here you can not use a credit card to pay the same bill.
Always set a reminder one day before the due date in the mobile calendar. Even by mistake if you forget to pay then you will get a reminder to do so. There are heavy penalty charges if you miss the due date to pay the bill.
How to control spending.
Thinks to keep in mind while using credit cards.
- Try to use a credit card only for bill payments, mobile recharge, gas booking, etc.
- Do not use more than 30% of the credit card limit, it affects your credit score.
- Do not get greedy to purchase unnecessary products in shopping sales.
- Always check hidden charges before buying any online product on EMI.
- Try to use the EMI option for large purchases.
- Periodically check credit score and spending to avoid crossing the 30% limit.
- Do not miss the due date of the credit card bill payment.
- Never use a credit card to withdraw cash.
- Keep different PINs for Debit Cards and Credit Cards.
FAQ
Is Credit Cards and Debit Cards the same?
No, both are different. Credit has an amount limit to spend and it is used to borrow money for a period. Debit is linked to your savings/current account.
What to do if I lost or someone stole my credit card?
Log in to the banking app or service provider portal. Go to the Cards section and block the card or contact customer care from the registered mobile number and ask them to block the card
Can I have multiple Credit cards?
Yes, you can have multiple cards. You can close whenever you want. It is good to have max 5 credit cards.
Should I use a credit card or a debit card?
What are the penalty charges?
The charges vary from bank to bank or service provider. But it is usually 9%-40% of the bill amount. Also, your credit score will be affected.
Conclusion
Credit card is a necessity in today’s world. A salaried person must have a credit card. If you spend wisely, have control over spending, and have the discipline to pay the bill before the due date. Then you use a credit card to pay bills and enjoy its benefits.
