Photo courtesy CardMapr on Unsplash.
Credit cards have been used for almost a century. In the earlier days, their form and material used were different. It is very easy for users to use a credit card for making payments and all they have to do is to swipe the card or make use of it for online transactions. The borrowed money has to be paid on time to avoid penalty charges and a person should ensure never to share credit card information with others to avoid fraud. The cards are accepted in almost all the countries with various credit limits and there are many advantages of credit cards.
The benefits of credit cards are difficult to ignore and almost all the persons today have credit cards in their wallets. Many people even have multiple credit cards. It is difficult to ignore the benefits and has become an indispensable part of our lives with the convenience offered. Some of the advantages of credit cards are:
1) Convenience
It is much more comfortable to carry a credit card in your wallet than a lot of cash. All you have to do is swipe the card at the places you visit and make payment. You need not count the change or write a cheque. The world is moving the digital way and the youth today prefer cards to make payments.
2) Worldwide acceptance
Credit cards are accepted in most countries of the world. It is easier to make payments in foreign countries and traveling becomes comfortable without having to worry about converting the currency.
3) Easy access to interest-free credit
Credit cards function on a deferred payment basis which implies that you can use the card to purchase the goods or services now and pay to Credit Card Company later. There is a grace period between the purchase and payment which can be from 45-50 days depending on the company issuing the card and during this period the company or the bank doesn’t charge any interest. The money remains in your account and doesn’t affect the bank balance every time you make a purchase.
4) Recordkeeping
It becomes convenient to manage your finances when using a credit card. The bank provides an online monthly statement that provides you the details of where and how much you spend the money through the card. This information can be utilized to keep track of your spending habits. In addition to this, some of the cards send year-end statements which have details of the amount you have spent through the year and this serves as a great resource when you are computing your income tax returns.
5) Rewards and offers
The credit cards offer reward points, discounts, and cash-backs for the purchases made. Some cards are offered in association with travel websites. For the people who travel often the reward card that offers miles or points that can be used for flight or hotel rooms is beneficial, as they offer a discount on travel tickets and accommodation. The other features include trip cancellation insurance, free airport lounge access, extra luggage allowance, priority check-in and boarding, and trip delay reimbursement.
Most of the cards give very good welcome offers on joining. A person should be careful in using the right card for making a purchase and should get a card for the activity he carries out most often. When the earnings reach a certain limit the points can be redeemed and used for merchandise or gift cards from retailers or can be used in restaurants, fuel, or groceries.
6) Recurring payments
A credit card can be used to make one-time payments or it can be set up to make automatic recurring payments for the utilities like electricity, gas, or phone bills. This obliterates the chances to forget paying the bills.
7) Credit score
A credit card can improve a person’s credit score. Organizations like CIBIL give credit scores to individuals based on how prompt they have been in paying the money back. Repaying on time boosts the person’s credit score and most banks and financial institutions consider a person’s credit score before deciding whether he is eligible for a loan.
8) Insurance
Credit cards have various insurance covers and each company has different covers and limits. The most popular insurance covers that come with credit cards are travel insurance, accident insurance, credit insurance, and purchase protection.
9) Cash withdrawal at ATMs
There is a cash advance feature in the credit cards that provides liquid cash to the cardholders and allows the cardholders to withdraw cash at the bank’s ATM. This is an additional feature offered by the banks. A small fee is charged for cash withdrawal on credit cards
The cash limit is the maximum cash that one can withdraw using a credit card and most banks offer 20%-40% of the total credit limit as a cash limit. As an example let’s say the total credit limit on a card is Rs 50,000 then you can withdraw Rs 10,000 to Rs 20,000 as cash and the remaining should be spent on card transactions only.
10) Purchase protection
The purchase protection benefit provides cover against damage or theft for the items purchased and covers the new purchases for three months after an item is purchased, but this varies for different issuers of the card.
There are many advantages of using a credit card and the benefits vary with each issuer. The details on how these programs work out are mentioned in the credit card’s guide to benefits that come along with the credit card. These are also available on the credit card website. It is important to do proper research to get the maximum benefits out of the card that you wish to procure. The best thing that a person can do is to be completely disciplined in making the payments on time so that he will not have to pay any interest on account of late payments.