In an era dominated by digital transactions and evolving financial landscapes, the credit card has emerged as a dynamic tool with a multitude of advantages. As traditional payment methods give way to modern convenience, credit cards have stepped into the forefront, offering a range of benefits that extend beyond just facilitating transactions. From simplifying purchases to enhancing security and offering enticing rewards, credit cards have reshaped the way we manage our finances.
Reasons To Use A Credit Card
You may have been advised against using a credit card to purchase goods and services, as it can get you interest charges and other penalties if you delay repayments. But, if you use a credit card wisely, it can reap numerous benefits that will save a significant amount of money, and you can manage your finances better.
For instance, cards come with reward programs, bonuses, etc., that you can avail of while making purchases. It also eliminates the hassle of carrying wads of cash to make payments for goods and services. The best part is that it is widely accepted, and is safer to use than your debit card.
1. It Can Help Build Your Credit Score
Your credit score is one of the crucial factors considered by lenders before approving your loan application. It contains information about your credit history, and without a credit history, no lender will offer a loan. In most cases, you need a minimum CIBIL score of 750 to apply for a loan.
The benefit of using cards is that you can build your credit, as your payment history contributes about 35% of your credit score. When you use your credit card to make purchases, you are helping your financial future. However, when you make purchases, you pay your card balance on time and in full. Failing to make on-time repayments could hurt your credit score.
2. It Is Safer Than Carrying Cash
You no longer have to carry wads of cash on your travels around or abroad. You can avoid the risk of pickpocketing or theft. You can carry a bank card with a predefined credit limit and use that limit to pay for almost anything, such as international bookings and payments at restaurants, hotels, bars, petrol pumps, etc.
Also, in the case of losing your credit card or unauthorized transactions, immediately contact your issuing bank and report the matter. Your bank will block your bank card. For unauthorized transactions, you have zero liability protection. It means that you are not liable for unauthorized charges. Instead of carrying cash, it is better to get a card and use it wherever you go.
3. It Offers Several Reward Programs
Credit cards come with a host of rewards, cashback, and bonuses that you can avail of based on your needs and preferences. For instance, you can get cash back on transactions made at petrol pumps, merchant stores, etc. Rewards are usually in the form of airline miles, gasoline, or cash.
Most travel credit cards offer a 1% fuel surcharge waiver for transactions between $500 – and $3000. Besides that, you have complimentary airport lounge access and travel insurance, to name a few.
4. You Can Keep a Record Of Everything
When you use your credit card to make purchases, your transactions are recorded by your bank card issuer. They send you your credit card statement to bill you. But you can use the same statement as a safety net for yourself. For instance, you can get a refund from our credit card issuer if the product purchased from your card is lost or damaged.
Credit cards come with purchase protection for eligible damaged or lost items. You can also avail of an extended warranty on products, which you do not get if you pay in cash. You can use your card statement to raise a dispute with the merchant or your issuing bank.
Furthermore, it is the best way to keep track of your expenses and manage your finances better. It shows you exactly how you have used your card, how much money you have spent, how much you have to pay to your bank card issuer, etc.
5. It Helps In Emergencies
At times, you have to meet an immediate financial requirement for which you can wait. In such cases, your card can come to your aid. For instance, you can use your card to cover the cost of medical bills that require immediate payment. Your credit card can be a lifesaver in times of emergency.
So, keep a credit card with you to cover the cost of emergencies. However, you must ensure to pay your card bills on time and in full to avoid interest charges and other penalties. Bank cards are the best option to manage your money if you use them judiciously.
6. Global Acceptance and Currency Conversion
Making international transactions without currency exchange hassles
Credit cards enable you to make purchases abroad without the need for currency conversion, often at competitive exchange rates.
Enjoying a seamless shopping experience while traveling
Credit cards offer convenience and security when making purchases in foreign countries, reducing the need for local currency.
7. Extended Warranty and Purchase Protection
- Extending warranty coverage on eligible purchases: Certain credit cards extend manufacturer warranties, offering additional peace of mind on your purchases.
- Safeguarding your purchases against damage or theft: Purchase protection policies offered by credit cards can cover eligible items against damage, loss, or theft.
Conclusion
Credit cards have transcended their role as mere payment tools and now offer an array of advantages that enhance financial convenience, security, and rewards. By harnessing their benefits – from building credit to enjoying rewards – you can elevate your financial experience.
However, responsible usage is paramount to avoid falling into debt. As you navigate the dynamic landscape of personal finance, consider integrating credit cards into your financial toolkit and utilizing them judiciously to unlock their full potential. Embrace these advantages wisely and empower yourself on your financial journey.
FAQs
How do credit cards differ from debit cards?
While both allow you to make payments, credit cards provide a credit line that you repay later, whereas debit cards deduct funds directly from your bank account.
Are there any downsides to using credit cards?
Misusing credit cards can lead to high-interest debt, impacting your financial health. Responsible use is crucial to avoid these pitfalls.
How can I avoid falling into credit card debt?
Pay your balance in full each month, avoid unnecessary spending, and prioritize budgeting to ensure responsible credit card use.