Should You Use Credit Card? – Pros and Cons of Using Credit Cards:
The credit card also bears the name of “debtless debt” which makes your catching up with your needs and requirements quite easily. In fact, this is the bottom-line for those who recklessly use credit cards for purchasing things.
The debate that revolves around the propaganda of using a credit card is endless with different opinions associated with different sets of people. Let’s break this rationally by seeing the possible alternatives of using a credit card:
- Paying cash – going the old school way,
- Using your debit card with instant balance deduction from the bank – a kind of digital money method.
In countries like India (the developing ones), we still have a way to go before we can use credit card everywhere. I am not talking about the online stores or any other huge retailer’s stores but at places like a parking lot or small stores, one can’t possibly choose to pay via a credit card. Therefore, using hard cash is the only way around. But we won’t only stop here stating this argument; let’s objectively view different pointers, pros, and cons of using a credit card as a payment method.
What is a credit card?
A credit card can be acted as a payment option which allows you to buy or purchase things or service on credit until a specific period of time. To put it in simpler words:
If (or not) one doesn’t have cash available at a specific point of time, one can make use of credit card to use the credits to pay at a later date.
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The keyword(s) to pull out of here is to “pay at a later date”. For revolving accounts, a minimum balance statement is due on every month end. On the other hand, for a charge card, the full balance to pay is due on every month end.
Various stores and merchants are now dismissing the use of cash as a mode of payment already. In fact, they only accept their fee through credit cards due to obvious security-related concerns. However, unlike the US, there is still a lot of scope remaining with hard cash in India. In fact, one can totally live without a credit card in India.
Credit Card – A kind of free cash? Or Not?
If you want to steer clear out of troubles, you must never consider credit card as a form of free cash. Remember, whenever you ask a bank for a loan, your credit history is checked thoroughly and it better not be bad to get your loan cleared. The amount you are using your credit card for has to be paid back in time to the bank or else you will be charged with heave penalties.
Thus, contrary to popular beliefs and no matter whatever people say, a credit card is not free money. If you don’t have the money right now, you should never charge your credit card then. Otherwise, it would be very tough for you to repay the amount in time.
Now that you have understood the basics of the credit card, the next big questions- Should you use credit card? Before jumping to any conclusion, first, let’s discuss the pros and cons of using a credit card.
Should You Use Credit Card?
Credit Card Pros – The Green Signal
1. Security and Convenience – There’s always a dilemma of “how much to withdraw from ATM?” No matter what, either the money you withdraw is going to be huge that there will always be a fear of theft or else it would be very inconvenient to withdraw money from ATM time and again because you ran out of money. Enter, Credit Card – a convenient mode of payment. You could always leave your money in the safer hands of the bank and can use your card for your purchases.
2. With Credit Card comes Big Rewards – As much as you use your credit card, the points on your card keeps increasing. Additionally, you can get other cash backs on several purchases, gas rewards. Many credit cards offer you free insurance on your air ticket, bus ticket, and hotel payments. Whatever that you save on your hefty payments can be considered as “incoming money” right?
Credit Card Cons – The Red Flag
1. The Free Money Dilemma – With a privilege of having to pay back later, we always end up spending way more than we should. That is where the banks are earning. Always remember, the exciting cash backs, reward points and other benefits that come with credit cards are always issued while keeping the profitability factor in mind.
2. Hurts your Credit Score if Abused – If your credit score is abused, you won’t be able to earn many credits or rather, it would be difficult. This brings your heavy responsibilities of balancing the use of credit card to a normal extent. Moreover, there are times when the credit card issuers don’t clearly state the terms and conditions and trap the users. Be the smarter one and ask for it in the beginning to specify all the terms and conditions.
Obviously, there’s no free meal in this world. If you are using a credit card today, you have to pay back later. However, the use of credit cards provides a lot of convenience to its users. Further, it can be handy in case of a tight budget where it’s better to use credit than to ask for debt/loan.