Does having a credit card actually help?
Compiled by Vinit Furia
Credit card may be the most revolutionary retail financial product which really helped change the landscape of economics for the consumers and businesses around the world.
Credit card has changed America and its business like never before by making the country a credit-based economy and deeply instilling credit culture in the nation.
Before running on your toes and getting this awesome key to open the door of insane shopping spree with free money, let us first understand, if this sweet nectar is any poisonous?
Credit cards generally work by giving you a set limit of money in advance for a free period of around 40 days depending of the card provider which essentially means you get free money for about a month’s time and pay it back before the due date. On top of this the honey drizzle of very attractive offers and cashbacks, airport lounge access,
etcetc. sweetens the deal even further.
All of this is done to make you spend the most that you can and fall prey to the bitter side of the offering, CREDIT DEBT, the interest rate charged on defaulted bills is outrageously high at around 3-4% pm or 36-48% per annum.
Now with the bitter and sweet side in front of you, let us take a smart and informed look at the topic.
To begin: a pro tip to be considered should be:
Only get a credit card if you are or can be financially disciplined in expenditure.
- Cashbacks and Offers:
Cash back programs and loyalty reward points can help you save an additional percentage on every expense paid by your card, to fully avail this service, ideally all of your expenses if shifted to your cards can assist you in saving a ton of money at the end of your bill cycle. Offers in festive seasons or select online and offline stores can shave off those extra rupees off a very expensive purchase.
Most credit cards include a variety of benefits such as complimentary lounge access at both domestic and international airports, premium access to Ott services, 24×7 concierge services, access to golf resorts globally, and so on. Many such benefits are associated with cards, and you can always choose the one that best matches your lifestyle.
- Building Credit Score:
Loans for any purpose today requires a thorough background check by banks or the NBFC providing it. This check contains a variety of KYC parameters and a credit score to gauge your credit history. “Credit score determines the rate at which you can access credit. For instance, the credit score is a factor in calculating the loading on the EBLR rate when the bank issues a home loan. So, better your credit score, the better interest rate you will be able to avail for future loans,” says Adhil Shetty, CEO, BankBazaar.com
Credit cards give your PAN a credit history and with passing credit age, the better your history looks with timely payment and low credit utilisation and other metrics, the more credibility you attain in the form of your credit score.
- Emergency Payment:
A credit card’s credit period can do wonders if used it only as much as you can pay back. Sometimes we may not have the desired payment amount in our account while paying online due to whatever reason, a line of credit with grace period of around a month is a straw to hold onto at the moment and acts like a friend, provided you can later pay it back.
In conclusion, with credit cards’ bitter sweet deal in front of you, if you have the control and discipline, and utilising the card smartly for your benefit, yes, having one does actually help.
Let us know your credit card experience in the comments below!