Let me start by saying: Credit Card can be your biggest enemy and also one of your biggest strength at the same time. It all depends on how you use it.
Some of those who use credit card end up living paycheck to paycheck. On Day 1 you get your salary and then the entire amount is used up in paying credit card bills. Then you live the rest of the month on a credit card again. You buy everything on EMI and the salary you earn is just enough to cover up your credit card bills. Some even get red marks on the credit report because of default on payments.
Getting advice from such people, another category of people doesn’t use a credit card at all. They believe in using physical money as it provides them with greater control. Also, they believe physical money will help them cut their expenses. Well, this is completely stupid too.
Should you take or not take a credit card?
Everyone should own more than one credit card is what I always believe. Credit card not only allows for discounts on shopping but also rewards and cashback. You might be paying the same amount of money via Credit Card as if you would have paid in cash, but you will be getting cashbacks at the end of the month.
I have 3 credit cards. One offers discounts on online purchases. Other offers discounts on offline purchases. And a 3rd one offers discount specifically for purchases made on Amazon website. It’s of no use shying away from taking a credit card. I buy the same item at a discounted price than you either online or offline.
If you feel you will end up defaulting on your credit card then I’ll suggest before using your credit card every time, first make an advance payment towards your card and then only use it. This will help in preventing you from entering into a debt trap. Another method is to first create an FD and then get a credit card against it. Many banks provide this option. It helps in building credit history even if has been damaged.
Another biggest advantage of Credit Card is the credit report. Over a long time, Credit Card will help you in building a better credit history by using judiciously. This will help if you are going to the bank to take a loan. Those with credit cards will end up getting better interest rates than the ones without credit card. This can be anywhere between 0.5% to 1%.
If you think this is small, consider the case of a home loan of 50lakhs at 7.5% per annum. If you have a good credit history you may get this at 7%. Over a period of 30 years, this would mean a savings of over 5lakhs. Also having a good credit score means you can bargain and compare between banks and choose one that gives you best interest rates.
CRED: If you haven’t heard this word then you are missing out on rewards when using Credit Cards. It’s a must-have app for making payments to credit card and managing multiple credit cards. It gives you timely reminders and ensures you make payments and also lets you earn rewards when you make payments. If you haven’t registered for this then please register by opening the link https://app.cred.club/spQx/763569ed You’ll also get special rewards up to 1000/- when you register using the link. Rewards are credited when you make your first payment. Ensure the first payment is a bigger one to get maximum rewards.