Merits and demerits of owning a credit card

Who thought that a small piece of plastic would have such great powers that can either boost your financial health or ruin it?

Credit cards are a great financial tool. But they are often looked down upon by many people due to its reputation. Most of the people believe that credit card is nothing more than a financial burden. However, the truth is, it is a very helpful financial device, only if used responsibly. Proper usage can do wonders for your financial health, while negligence can damage it completely. So, if you are planning to apply for one, it is best to weigh all the options carefully and then make a decision.

Merits and demerits of owning a credit card

What benefits can you get with a credit card?

There are plenty of reasons as to one should have a credit card. This small piece of the card provides an ample amount of benefits if used properly. Here are some advantages of using a credit card:-

Convenience – No wonder, credit cards are convenient. Not everybody likes to carry cash around, especially if you are planning to make big purchases. It is also not secure these days. It is a perfect alternative to cash as it is easier to conceal and carry. If anytime you lose your card, you can call up the bank and get the card blocked instantly to avoid any misuse. But this can’t be done for cash.

Boost credit – Credit cards are not only to make purchases, but it also helps in building your credit rating. Making purchases every month and paying them on time will help the credit rating agencies to trust you with their money. In simple words, using a line of credit and paying off on time will build your credit which will make lenders to lend you money and that too at a low rate of interest.

Rewards and cash back – Today many credit card companies have tie-ups with online stores or restaurants or even air carriers which allow customers to earn cash back or reward points when purchased from these stores like Yes Bank credit cards comes with their collaboration with Swiggy, Grofers, reliance trends, zomato and etc. here the customers also get discounts and cash back. These points get accumulated over time which can be used by customers to make purchases.

Interest free period – Right from the bill date till the due date, customer get an interest free period. This means that customers don’t have to pay any interest on the purchases during this period or simply put, save on interest.

Easy tracking – Consumers using credit cards get monthly statements that inform the number of purchases done in a month and which stores. It is easy to keep track of expenditures done in a month on credit card. With cash, consumers would have to keep a copy of every bill to track the monthly expenses which are cumbersome.

Demerits of using a credit card

There are also some demerits of using a credit which should not be neglected. Credit cards need to be respected and used responsibly. Fail to do so and by the time you realize, you are already in a huge pile of debt.

Debt accumulation – Credit cards are very tempting. Because of their easy availability and convenience, most people tend to overspend. The problem occurs when the user is unable to pay the outstanding amount in full and the debt keeps accumulating. As a result, it damages your credit ratings further reducing your chances of borrowing money.

High-interest rates – The reason many people are scared of getting a credit card is that interest charges are high on credit cards. Paying for products or services through a debit card or cash won’t hurt your credit at all. But purchase the same things with a credit card and it can pile up your bills for months if not paid timely. The only way you can protect this is by getting a lower interest card or interest-free card. But this is only possible if your credit ratings are excellent.

A possibility of cyber theft – A lot of people are using credit cards to make online purchases. During these purchases, users have to enter their valuable credit information on the website. Due to increased cybercrime, the possibility of stealing your credit information is higher as websites can be hacked easily which can be further used for fraudulent activities.

So, comparing all the pros and cons, it is easy to say that the advantages easily outweigh the disadvantages. This means that credits cards are a great tool and they do more good than harm when used responsibly.

The question here should not be, whether to apply for a card or not. Rather it should be how to use it properly to reap the benefits. Also, before applying for a card, ensure you keep into account your current income and other financial commitments. If you are already living from paycheck to paycheck, then you want to think again before applying because it will only add to the worries.

 

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