What is a Credit Card?
A Credit Card is a digital payment method where a card is issued by a particular bank to enable the cardholder to use the money on a credit basis with a certain limit decided by the bank based on your credit score, income, age while looking for a credit card in India.
What is a Credit Card Interest Rate?
- Credit Card Interest Rate varies from one card company to another and varies across different credit cards from the same company.
- Interest is charged on credit cards only if you have not paid the Credit Card Bill in full or have withdrawn cash from ATMs using the credit card in India.
What are the advantages of using a Credit Card?
Substitute to Cash
- Credit Cards will come to your rescue when you don’t have cash at hand.
- You can simply eliminate carrying money with you.
Alternative to Loan
- The use of Credit Cards is an easy way to access credit money.
- One can use credit card funds and pay all the bills in the next month.
- You don’t have to apply for a loan or wait for a loan sanction.
- It saves time if you are in urgent need of money.
Build your Credit Score
- The Credit Card may help you build a credit history by using the credit card funds and repaying the money on time.
- It may help you in increasing your credit score, and a good credit score will help you in getting loans in the future.
Reward points, cashback and discounts –
- Credit cards offer special discounts and various cashback offers or reward points for the purchases made using a credit card.
- Some brands and credit card companies collaborate to offer you discounts and cashback offers. Like, if you book a flight ticket from a particular bank’s credit card, you may get up to 100 Rs off.
- Reward points are redeemable. When you use a credit card, at the end of the transaction, you get reward points. You can collect these reward points together and buy items on the bank’s websites.
Universally accepted –
- Credit Cards are a universally accepted way of payment.
- You can use credit cards to make purchases globally.
- You can travel around the globe without worrying about currency conversions.
A way to track all payments and expenses –
- The credit card statement and credit card bill may help you in tracking all the expenses you have made, when and where you use the card.
- If you don’t recognise a transaction, you could show that to the credit card company.
- EMI for huge purchases –
- You can use your card to make payments using equal monthly installments for large purchases like a phone, television, laptop, etc. You just have to pay installments instead of lump-sum money or nonpayment.
- It is much cheaper than applying for a personal loan.
What are the disadvantages of using a Credit Card?
High-Interest Rate –
- Credit Card companies will charge you a higher interest rate on Non-payment of Credit Card Bill before due dates
- Credit Card companies charge a high rate of interest if you withdraw money via ATM using your credit card in india.
Increase in Unwanted Expenditure and Overspending –
- As the money in your bank account remains the same, you may be convinced to use credit card funds on unnecessary purchases or on purchasing more, which may lead to more consumption and a huge credit card bill, which you might not be ready for.
Hidden charges on credit card –
- A Credit card appears to be very convenient, but it includes many hidden charges like taxes, fees, renewal fees, processing fees, joining fees, late payment fees.
- If you miss any payment, you will be charged penalties that would affect your credit score negatively.
Credit card fraud –
- There is a range of fraud schemes that target credit cards.
- Scammers can use skimming devices, phishing techniques and other tricks to steal your credit card information to use money.
How to use Credit Card Effectively –
- Note and Check all your credit card transactions to recognise any fraud transactions.
- Do not miss any payment of Credit Card Bill, as it will harm your credit score as well as it will cost you a huge penalty.
- Pay all the dues; any outstanding amount will result in high interest levied.
- Spend money wisely. Don’t spend amounts which you won’t be able to pay.
- Don’t share your card details with anyone like Card PIN, CVV, Date of Expiry, Card No., unless you are using them for yourself on online transactions or for applying for loans.
- Choose an EMI option for big purchases like mobile, laptops, televisions, etc.
- Don’t utilise your credit limit completely or by a close amount; maintain a good credit score by using less than 30% of your limit at all times.