Many people are apprehensive about taking a credit card because they are afraid it will lead to debt. But at the same time, a credit card can help you manage your finances if you use it with care and caution. Here are some advantages of keeping and using a credit card.
It is better than carrying cash
If you lose your wallet, there is little chance you’ll find it again, especially if it contained cash. But if you lose your credit card, you can quickly get it canceled and nobody will be able to use it. Most financial institutions have put security measures in place to protect customers who’ve lost credit or debit cards.
Make up for a cash shortfall
Many people live paycheck to paycheck. Sometimes, there is an emergency and in the absence of enough savings, we run of money to pay for even household expenses. But if you have a credit card then, you don’t have to suffer the ignominy of asking someone for a loan. Your credit card can work like an emergency line of credit until you get your next paycheck.
Helps you to build your credit score
If you use your credit card judiciously and responsibly, you can actually build your credit score. This is because your credit card payment history is an important part of your credit file. If you pay your credit card dues on time and maintain a good standing with the credit card company, it can help you build a good credit score, which will be useful if you apply for a loan later.
Helps you earn reward points
One of the perks of having a credit card is the system of rewards and points. You can earn points on every purchase you make through your credit card. For instance, Kotak Bank offers 19 types of credit cards, each with a different reward and points system. You can earn rewards like movie tickets, fuel surcharge waive-off at petrol pumps, cashback on movies and dining, and retail spends.
Get interest-free days
Banks charge an interest on the money they lend out through credit cards. But if you are careful, you don’t have to pay a steep rate. The amount of interest you are charged depends on your spending, your repayment and how it is repaid. If you make full repayments each month (before the due date on the statement), you can have some or all the interest waived off.
Benefit from complimentary extras
Some credit cards have complimentary features like purchase protection, extended warranties on purchased products and services, travel insurance and more. Other complimentary features include access to VIP lounges in airports, flight offers, tickets to international events, personalized card design and even free wine when you eat at some hotels.
Credit cards work in international currencies
Suppose you go abroad for a vacation. If you have a credit card, you don’t have to go to the trouble of exchanging your local currency for the international one. Please note, currency conversion charges may apply. Some credit cards even waive fees on international purchases and these can be useful if you plan to do a lot of purchasing abroad.
As you can see, having a credit card can be really useful in the right circumstances. But don’t forget. Maintain credit discipline and pay your dues on time. If you do these two things, a credit card will serve you well.