Credit Card – Should I apply for a credit card?

Most of the individuals consider credit card as a taboo. They think that it might ruin their lives, or can put them in a debt trap and so on.

Further Reading: ICICI Bank

Most of you must have heard financial planners advising people to stay away from credit cards since individuals tend to use their credit cards recklessly in the beginning and then regret later on when they become incapable of repaying their credit card bills.

Credit cards are basically a personal unsecured loan that comes with a high rate of interest. Interest rates could be as high as 4% per month which effectively turns out to be whooping 48% p.a. Hence, if you don’t repay your credit card bills then you would only be welcoming miseries for yourself.

But there are numerous benefits of having a credit card if one uses them wisely. These benefits have been discussed one by one below: –

1.) Interest-free credit period 

Credit cardholders can avail an interest-free period of up to 20-50 days. What this means is that a purchase made today will become due for payment, only after a certain period of time. For example, you have a credit card in which the statement is generated on 15th of every month.

So if the statement is generated on 15th October then the billing cycle would be from 16th September to 15th October but the payment will become due somewhere around 1st November or even later depending on the policies of the credit card company. So a purchase made by you on 16th September is payable by 1st November which translates into almost 46 days of interest-free credit.

2.) Rewards

Credit cards reward you for every penny you spend. The rewards are generally given in three forms – cash, points, and inter-miles. Credit card companies also tie-up with other companies in order to provide exclusive benefits to the cardholders.

For example, Jet Privilege HDFC Bank Signature/World credit card rewards its customers with 6 inter miles for every ₹150 spent on retail expenses. These inter-miles can be redeemed for subsequent flight bookings, hotel bookings, fuel purchases, etc.

3.) Cashbacks

There are multiple offers on online e-commerce websites which are only applicable on shopping through credit cards. For example, Amazon Pay ICICI Bank credit card is a tie-up between Amazon and ICICI Bank which gives unlimited cashback up to 5% on every purchase on Amazon and 1% on all other payments.

4.) No cost EMI on Credit Card

With credit cards you don’t have to pay for your purchases in full as you can avail no-cost EMI on your online as well as offline purchases. RBI has banned the 0% EMI scheme which was earlier used by the sellers for boosting their sales. No cost EMI is different in the sense that the interest part is borne by the seller himself. But there is a catch that GST applicable on the interest is to be borne by the cardholder himself.

Also Read: Eight golden rules for investments and goal planning

5.) Cash on-call/Loan on call With Credit Card

With credit cards, you also have the option of withdrawing cash from the ATMs (this facility may or may not be available on all cards). However, such cash withdrawals are subject to upfront charges which you must look at before withdrawing. Not only this, some credit card companies may offer you cash loans/personal loans at lower interest rates based on your credit history.

6.) Zero Liability

All your transactions made by credit cards are secured. Moreover, in case of any unauthorized transaction, you just have to report any fraudulent transaction made from your credit card as soon as possible and prove that you are nowhere related to that transaction like for example, you possess your card, you haven’t shared PIN or CVV of the card with anybody, etc.  In case you are able to prove it then the credit card company will bear that whole amount themselves.

7.) Special benefits (Lounge Access and other benefits)

Cardholders also get complimentary Priority Pass Membership for preferential access to lounges across the world. Premium cards like HDFC Diners Black credit card give complimentary annual memberships of Amazon Prime, Club Marriot, Zomato Gold, etc.

8.) Annual fee waiver and Credit Card

Though there are some credit cards which can be issued to you without any annual or renewal fee. Some credit cards waive off this fee when you spend a certain amount in the year prior to the renewal year.

For example, simply click SBI card reverses subsequent year annual fee upon spending Rs. 1 lac a year.

Further Reading: Mutual Fund Sahi Hai

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