The Upside Of Credit Cards

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    It has been repeatedly said that credit cards are debt-attracting plastic nightmares that society does not need. It is true that the high interest rates and the excessive need for the millennial generation to use money that they do not have have caused debt to creep into many lives. If you are not the type of person to purchase overpriced burgers, beers, and pizzas with a credit card during the first half of the year, only to pick up gym memberships and diet pills during the second half, using your credit card wisely can be helpful in many ways. In many cases, you are better off paying for goods and services with credit cards rather than a debit card. Do not let the people who abuse credit cards prevent you from gaining the benefits from using one.

    The Upside Of Credit Cards

    Listed below are some of the benefits of using a credit card.

    Convenience - Getting to use money that you do not really have is a boon in many ways. Money is easily available to you in the event of an emergency. Still, you must always keep in mind your capacity to pay back the debt and the fact that having beer and peanut masala with your friends is not an emergency.

    Low interests - We all know that credit cards have a high interest rate associated with them. This is the case if you do not pay back your debts in time. But if you pay back your spends within the specified period, you either pay very little interest or no interest at all, depending on the type of card you use and the duration in which you have repaid your loan. Since credit cards usually have a monthly rate of interest, the longer you take to pay off the debt, the higher will be the interest.
    Purchase protection - Some credit card companies will help you deal with disputes that you have incurred with merchants. For instance, credit card companies will dispute against a merchant if he is unwilling to take back a defective product. Contact your credit card company next time you have faced an issue with a product bought with a credit card.
    Sign-up bonuses - Many credit card companies have several offers on availing a card from them. From gift bags to reward points, companies are getting creative with the gifts they are providing to their customers. Doing a little bit of research before picking up a card can help you avail a hearty gift from the card provider. That being said, don't opt for a credit card with a 40% p.a. interest rate simply because they're giving you an Amazon gift voucher worth Rs.250 for free.
    Cashback and reward points - As mentioned before, credit card companies are coming up with creative ways to reward customers. Many companies now offer cashback and reward points to customers. Cashback is when your card company gives back a certain amount of money you have spent on the card after a specified limit. And reward points are similar in the sense that points get accumulated to your card each time you use it, and these points can be used to avail gift vouchers, receive air miles, get discounts on spends from specific stores, etc., depending on the type of card you own.
    Safety - Paying with your credit card is a safer option than paying by cash or with your debit card in many cases. In the instance of a fraudulent usage of your card, simply contact the bank and they will reverse the payment in most cases. On the other hand, debit cards are not as secure, and paying by cash for a defected product, for example, will have to be sorted out by yourself.
    Improving your credit score - If you are looking to improve your credit score, using your credit card responsibly will help. Your card company will usually report your activities with regard to your credit card payments to credit bureaus. Using a credit card responsibly can have a positive effect on your credit score. Make timely payments, don't overuse your credit limit and make sure your loan or credit card application is not rejected in order to see an improvement in your credit score within as little as a month.
    Debt transfer - In case you have a high interest loan, it can be transferred to a credit card for a lower interest rate depending on the interest rates provided by the card company. Although useful, you should always work out all the costs involved in transferring debts before you decide to do so.
    EMI facility - Most stores and online e-commerce platforms offers an EMI facility if you pay using your credit card. In case of a large purchase, you do not have to pay the entire amount all at once. You can split them into monthly instalments. Moreover, the EMI options provided by merchants and online e-commerce platforms usually provide a much cheaper interest rate than your credit card.

    Tips on how to eradicate the bad effects of a credit card.
    By being mindful while using your credit card, you can avoid most of the pitfalls associated with it. Listed below are a few tips on how you can avoid the bad effects of a credit card.
    Understand the conditions and charges of your credit card so you are fully aware of the hidden costs, if any. Do not just grab a card that a bank offers simply because it has a picture of your dream vacation spot on it. Chances are that if you have not read the fine print and become excessively indebted because of it, you may not be financially capable to visit that place anyway.
    If you are not financially capable to pay off the money used from your credit card, do not use it. Set a limit and stick to it irrespective of how badly you want to buy that watch that tells you that you are not exercising enough. Just visit your nearest gym for a trial session and the trainers from there will do so for free.
    Ideally, you should not be spending more than 40% of your credit limit. Sticking to this limit will not only ease the repayment process, but will also ensure a healthy credit score.
    Always choose the EMI option while purchasing a product, whenever applicable. As mentioned earlier, the interest on the EMI option offered by merchants and e-commerce sites are much cheaper than that of your credit card. So, unless you are the type of person that was tremendously worried during the demonetization, opt for that EMI.
    Keep your card at home after that fight with your spouse or girl/boyfriend. Do not make impulsive purchases using your credit card. Always use it only for planned purchases.
    Do not miss a card payment at any cost. This will drastically increase the rate of interest payable towards the spends on your credit card. In addition, always try to pay off your card in full.
    Although owning a credit card can get troublesome, it need not be. Following the tips mentioned and using your card wisely can go a long way. At the end of the day, how you use the card can be the difference between indebting yourself to the point of no return and owing a modern day loan-vending device at the tip of your hands. Use it, Don't abuse it!

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