Being eligible for a credit card is a boon in disguise due to the multitude of features offered by them to users in terms of discounts, benefits and overall savings. Each type of credit card comes with its own features that should be taken advantage of accordingly.
However, one potential issue of having credit cards on hand is making irresponsible expenses that could hamper your finances over time. This is why it becomes crucial to know the best way to utilise your credit card and make the most of all rewards offered. Before using one, it is always important to keep your financial goals in mind since its overuse could cause financial strain.
Still thinking about owning a credit card? Look no further and find out the benefits you can potentially avail from its use!
A credit card is a great way for you to remain financially secure even when you are low on savings. You can use one to make all your purchases and payments without worry and utilise a portion of your next earnings to pay off bills in the coming cycle, usually within 45 days of its usage. You may even convert eligible large-scale purchases made via credit cards into low-cost EMI payments.
While choosing to go for a credit card, it is vital to look for those which will serve your immediate needs or requirements. Currently, multiple credit card options provide offers or benefits over a particular type of spending. These include entertainment, dining, travelling, fuel, business expenses, store/service specific, etc. Making optimal use of cards that benefit you in a particular way can help with overall cost savings.
To incentivise users to avail of a particular brand’s credit card services, many tend to offer attractive one-time sign-up bonuses to customers. These can be vouchers, merchandise, gift cards, flat discount offers, or increased reward point earnings within a stipulated duration. Often, the rewards will be made available in exchange for making spends up to a certain extent in the initial few months or more of owning such a card.
One exciting benefit of certain credit cards is that you can transact through them in ATMs and receive instant cash for all your short-term emergencies. In most cases, the limit for cash withdrawals is much lesser than the provided credit limit. Depending on your issuer, the borrowed cash may be subject to interest or additional charges, especially in situations of non-repayment within the specified 45 to 60 days.
Using a credit card can help build your line of credit so that banks can learn about your ongoing credit history. This depends on your overall card usage and repayments which determine your creditworthiness. A high value of this can make you eligible for loans in the future and raise the eligibility for receiving newer credit cards.
On the other hand, non-banking lenders may look for your credit score in order to understand your credit history. It is determined by factors like number of accounts created, timely repayments, consistent profile details, number of enquiries made, and credit limit utilised. Over time, you can cultivate a good credit score with repeated use and repayment of credit cards.
Some credit cards’ benefits include insurance coverage against personal accidents or other specific types of insurance against their card’s product type. For instance, if a credit card is specially designed to cater to customers who fly often, it may include coverage against flight or travel-related hazards.
Let’s also learn about some things you must avoid doing with it to conserve your finances better:
Propensity to overspend
One major issue that could potentially arise from the use of credit cards is overspending. You may make many purchases or repayments through one without realising that you have hit your limit or are close to it. Such a situation will pose you with major financial debt by the end of the cycle and affect your credit scores.
Avoid penalties with timely repayments
Another way in which you could be at risk of high debt is through delayed repayments after a specified billing cycle. Failure to make timely payments often results in high interest rates being levied on your existing dues which could drastically impact your finances.
‘Minimum Due’ Trap
Certain credit card issuers may provide an option to customers to pay off a nominal sum as the minimum due amount. This could seem great on paper but it can do more harm than good. However, availing this option is a common mistake people make as it means paying additional interest over your existing dues since it had not been repaid in full.
Surcharges and additional fees
Making payments through your credit card can sometimes result in additional charges, such as for railway bookings and fuel. Besides this, extra fees such as your card’s annual renewal fees and processing costs can affect your overall finances if you are not mindful of it beforehand. It is important to plan ahead in advance and reserve funds for such payments. At times, surcharge fees can be waived off if the total amount to pay is within a certain range as specified by the bank.
If used correctly, a credit card can offer you more benefits than hinderances later on in the future. However, cultivating good habits pertaining to its use and repayment in the long run can help conserve your finances. Doing so will keep you one step ahead of those who utilise traditional means to make payments/purchases. Go on Bajaj Markets and learn about various credit cards that you can apply for today!