The Pros and Cons of Credit Cards in India:
The nature of our society has been marked by different political, social, and economical changes through different modes and means. Out of these, the sea change brought about by technology has been very crucial. Technology has changed our outlook towards life- from communication to transportation to payments.
With the rise in the population of the Netizens today, the countries are on a ‘cashless’ spree. The e-commerce payment system has not only digitalized the whole process of transactions but has also made it convenient and easy. Some forms of e-transactions include ATM cards, Credit Card, E-wallets, Debit Cards, and Cryptocurrency, etc.
Out of all the modes of e-commerce payments, credit cards are the most common form. Credit cards are totally different from debit cards- a debit card is not a credit card. When we use a debit card, the money is being deducted from our checking account. On the other hand, when we use a credit card, we are basically borrowing money from the bank which is to be repaid later according to the directed time.
The Pros and Cons of Credit Cards in India
Credit cards allow us to make payments through borrowings against a credit limit. There are various advantages of using credit cards over debit cards. They can be summed up as:
Pros of Credit Cards in India:
- It helps one to go cashless. Not everyone wants to carry cash all the time. Moreover, withdrawing cash anywhere and everywhere is not feasible and convenient.
- There are a number of rewards associated with credit cards. Some banks provide discounts, cash backs, etc that are exclusively available on some credit cards.
- Buying expensive products and services is far easier from credit cards. A hefty amount is not spent at one go. You have to repay the amount in installments (EMI) with even zero interests.
- Credit cards have theft protection. If you lose any money or the card gets stolen, the liability is guaranteed by the bank. In contrast, if cash is lost or stolen, it is very hard to get the money back.
- Credit cards provide travel insurance against lost luggage, canceled trips, and even death. The coverage that one gets depends on the respective banks and offered terms.
- Credit cards help in the cheaper conversion of currency. Cards such as Visa or Mastercard can save up to 8% currency as compared to cash.
- Credit cards are the best tool to help us track our expenses. It helps us in budgeting and making effective plans.
- It saves money that is spent on buying extended warranties for maintenance and coverage. The advantage of extended warranties is free on purchases done on many credit cards.
- They are a whole lot safer to use. If you are a thrifty credit card user, you do not have to worry about excess payments and unreasonable interests. All you have to do is to repay your debts on time and maintain a good credit score.
Cons of Credit Cards in India:
While tallying up the pros and cons, we come at a point where we realize that no matter how common credit cards are, there are some cons that we should consider while issuing one—
- The threat of overspending always looms large. There are times when we tend to spend more than what is required. People go on buying their desires rather than their necessities, ending up in dire consequences. All we are left with are overburdened shoulders pressed by unthinkable amounts of debts. This vicious circle has led to the breakdown of many companies and business tycoons.
- Borrowings through credit cards are of the high cost. The interest charged is a little higher and it is never uniform. There is no guarantee that the rates will be constant. It can rise unexpectedly causing a huge cut in our budget and expenses.
- Not everyone can apply for a credit card. The requirements are just too many. If you have a low income or a weak credit history, you cannot get a credit card. In some cases, even if you meet all the requirements, you are not eligible for a credit card because it simply depends on the bank. The more connections you have, it is easier to get credit cards and loans.
- Maintaining a credit card is a little difficult. You not only need to have a good credit score so that the bank allows you to borrow, but you also need to pay the annual fees in order to carry on with your service with rewards. The annual fee for a few cards is high for no reason.
- If you are caught into the trap of overspending, misuse of funds, missed payments, you will suffer badly. You might find it difficult to get good rates for future payments or get overburdened by debts or even worse- due balances can get the bank file a lawsuit against you.
- The details and intricacies of credit card documents are not told properly. The statements are written in such technical words and small prints, it will be difficult to go through it. Those who do not put extra effort into actually getting it reviewed land up in some trap where the interest rates are duly high or the annual payments are increased successively without your knowledge. Therefore, getting your documents reviewed is very important.
By way of conclusion, we can point out that we may opt for a credit card but only keeping in mind the restrictions.
If we are ready to clear the debts on time, pay the interest on the overdue amount, maintain a high credit score and not overspend, then we should apply for it provided we meet all the requirements. Using credit cards/debit cards/ATM cards or any other means of e-payment is a sign of progress for any country, therefore, we should encourage cashless modes of payment as much as we can.