A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment.
Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time.
In addition to the standard credit line, the credit card issuer may also grant a separate cash line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances that can be accessed through bank tellers, ATMs, or credit card convenience checks.
Such cash advances typically have different terms, such as no grace period and higher interest rates, compared with those transactions that access the main credit line. Issuers customarily preset borrowing limits based on an individual’s credit rating. See How To Get Amazon Credit Card.
A vast majority of businesses let the customers make purchases with credit cards, which remain one of today’s most popular payment methodologies for buying consumer goods and services.
Benefits of Using Credit Card
Now that you have seen what a Credit Card is all about, let’s explore the benefits that come with making use of credit cards. See Amazon Online Shopping.
Depending on your needs, a credit card comes with a host of features and benefits to save money while making transactions. Here are the top benefits to help you to know more about credit cards:
Hassle-free shopping experience
The benefit of having the best credit card is that it has made shopping easier and more convenient. You no longer need to visit malls or stores to make purchases.
With your credit card, you can make big purchases from the comfort of your home. It can help you avoid putting any burden on your monthly budget with a credit card.
A credit card allows you to buy products and services on low-cost EMIs. Another option that has become popular is the Buy Now, Pay Later, which is ideal for salaried borrowers with fixed monthly incomes.
No need to carry cash
Credit cards are the best alternative to cash, as it eliminates the need for carrying cash. Credit cards are accepted almost anywhere you go.
If you do not have cash, you can simply use your Kotak Mahindra credit card to cover your expenses and repay the outstanding amount at the end of the month.
The process of making a transaction is simple. All you have to do is swipe your card at the PoS terminal or enter your card details to make online payments.
Rewards, cashback, and offers
The best credit card comes with rewards and cashback that fits your needs and requirements. Depending on your credit card issuer, your credit card comes with a host of special discounts, cashback, or rewards points for purchases made through it.
Before getting a credit card, it is imperative to assess your needs. For instance, if you are a frequent traveler, it would be wise to choose a credit card that offers free airport lounge access or travel insurance. Also, there are credit cards that offer special discounts on shopping, travel tickets, and accommodation.
Easy cash withdrawal
Another benefit of having the best credit card is that it allows you to withdraw cash whenever the need arises. However, it is worth noting that using your credit card to withdraw cash follows a small fee that you will have to bear while repaying your outstanding amount.
Widely accepted
The best thing about a credit card is that it is accepted worldwide, as it is the most common mode of payment across the world.
You can use your Kotak Mahindra credit card to make international bookings and payments at airlines, restaurants, hotels, stores, and petrol pumps with ease.
It makes your travels around the world convenient. However, using your credit card abroad can cost you high foreign transaction fees and high foreign exchange rates.
Meet emergencies
If you are wondering what is a credit card, it is a type of loan that offers to cover the cost of emergencies for you and your family. For instance, you can use your credit card to pay your medical bills. It eliminates the worrying of arranging funds for your medical bills.
Keep in mind that you will have to make on-time payments to avoid hefty interest charges and higher APR%.
Improves credit score
Some people also use credit cards to improve their credit scores. Your credit score is a three-digit number that indicates whether or not you are a creditworthy borrower. It is considered one of the crucial parameters to determine a borrower’s eligibility.
When you repay your credit card bills on time, it leaves a positive impact on your credit score, allowing you to secure loans in the future.
So, apply for a credit card to make your life convenient and manage your finances easily.
Disadvantages of Using Credit Card
While they have innumerable benefits, there may also be a few disadvantages of credit card. As it is said, excess of anything is harmful, it is recommended that you use your credit card effectively. Here are some factors that may prove negative if you don’t use the credit card effectively.
Overspending
Since credit cards offer you credit to a huge extent, there may be instances where you make unnecessary purchases of the available limit and fall in debt trap later.
Solution: To avoid overspending on your credit card, you must not spend more than 50%-60% of your credit limit.
Ensuring this, and staying a little tight on your unnecessary expenses will keep you away from overspending and hence, will not let you fall in debt.
Fraudulence
Even though credit cards are considered one of the safest financial tools, they may still be susceptible to online fraud. Fraudsters or thieves may also steal your credit card information and make improper use of the same.
Additionally, if the fraudulent transaction is made by any third party, it becomes the cardholder’s responsibility to inform the bank within three days of the occurrence of the transaction.
Solution: To safeguard yourself against such fraudulent transactions, you can choose to disable any foreign transactions on your card.
Additionally, you are advised not to open any emails or messages that look suspicious to you. Along with this, do not hand over your credit card to anybody and/or share your credit card details or PIN with anyone.
High Interest Charges
There is a very high interest rate applicable on the billed amount using a credit card, which may eventually lead you to high debts. However, this interest is applicable only in case of late payments of the credit amount.
Solution: If you continue to pay your credit card bills on time, you can easily get rid of the high interest charges on a credit card.
Surcharges
Upon making a certain specific payment using a credit card, you might have to incur an additional fee known as a surcharge. This fee, is, however, generally applicable on expenses made on fuel and railway bookings.
Solution: Certain credit cards, such as the fuel credit card offer a fuel surcharge waiver. The surcharge fee is generally waived off when the transaction amount is within a specific range as decided by the bank. Additionally, there might also be a limit on the monthly surcharge waiver amount.
Limited Cash Withdrawal
Unlike debit cards, cash withdrawals from credit cards charge a fee. There is an applicable annual interest rate of around 40% (3.35% per month) on withdrawing cash using a credit card.
Solution: To stay away from paying any additional charges, which is considered to be one of the major disadvantages of credit card, you must opt not to withdraw any amount using your credit card. Use your debit card to make cash withdrawals, instead.
Additional Expenses
A lot of credit cards include some additional expenses such as the annual credit card fee, charges on foreign transactions, charges on cash withdrawals, etc.
Solution: Before you apply for a credit card, you must go through all the related terms and conditions so that the applicable expenses are not hidden.
You must be aware of all the expenses that you may have to incur on your credit card before you choose the type of credit card that you want to buy.
Minimum Due
One of the major disadvantages of a credit card is the minimum due amount mentioned at the top of the credit card statement.
A lot of credit card holders, especially the new ones, mistake the minimum due amount for the total credit card bill amount and do not pay the bill amount in full.
Due to this, users believe that their credit card bill is actually low and eventually end up spending a higher amount and paying high interest charges.
Solution: It is important to study the credit card statement thoroughly. It is equally important to be aware of all the major credit card terms in order to avoid falling into any sort of trap.
I hope that you have found useful information in this article. In case of any other questions about the Benefits of Credit Card, kindly make use of the comment section below this article
