To use a Credit Card or Not to Use a Credit Card: The debate keeps popping up every few weeks. And I always find general negativity around using a Credit Card. Today, I wanted to write some of the real advantages of having a credit card with you. And it has much more to do than just boosting your credit scores. Let’s find out!
By the way, I have also written another post on the Disadvantages of using a Credit Card. You should definitely read it too.
For now, let’s look at the advantages first!
One Statement for All Monthly Expenses:
Since Credit Cards are mostly about spending, you will get a better idea about your spending pattern if all your spending is grouped together. Just look at your bill and you can instantly find out where you spent money on.
A lot of people use multiple credit cards, and in most cases, each credit card is used in some specific merchants. This grouping further helps to narrow down the merchant-wise expenses list.
Luckily, Cred App does a good job of automatically detecting your credit card statements, finding hidden fees, and notifying you about due dates over Whatsapp. You can also use our FinTalks Credit Card Planner.
Keeping Bank Accounts Away from Day-to-Day Transactions:
The next advantage of having a credit card is to safeguard your bank account from your daily transactions.
You only pay the credit card bills once a month, and that’s the only expense marked to your bank account. It keeps your bank statement neat and organized too since you can easily check your month-on-month expenses from your statement.
The Emergency Credit Line:
Okay before I even talk about it, there are 2 very important things I want to state:
- Credit Cards are NOT meant for drawing out cash. It will attract interest.
- You should always have ‘Emergency Funds’ in your hand, which can support you for the next 4-6 months.
But just having a ‘credit limit’ at your disposal is a privilege that a lot of people don’t enjoy. In the case of extreme emergency, when you possibly exhaust your emergency funds too, you can take an upfront loan on your credit card and pay it off with interest over the next few months.
Trust me, this is much better than borrowing money from your friends and relatives.
Save Money on your Purchases:
Be it a direct discount, reward points, or cashback, Credit Cards attract a lot of people due to this benefit. I won’t go into much detail, however, think if you are buying a ₹15000 mobile phone paying the full price versus using your credit card to get flat 10% off (₹13500), why not!
If you plan your day-to-day expenses well, you can save a decent amount of money over the year.
Complimentary Benefits:
Free Lounge Access, Complimentary Insurance, Milestone Gift Vouchers on fulfilling spends, Buy 1 Get 1 Movie Tickets (or even Free Movie Tickets), Fuel Surcharge Waiver, are just some of the many benefits offered by a Credit Card.
Credit Scores:
Okay, now back to the basics! As you use your credit card wisely and do timely bill payments every month, your creditworthiness increases, your credit profile gets stronger, and your credit score stays on a positive note. This will help you get other credit cards as well as attractive rates on loans if you ever need it.
Note that I didn’t say, ‘using credit cards will increase your credit score’. Nope, a credit score increase and decrease has a lot of factors into play. I will discuss it someday.
Money Management:
If you develop a habit of using credit cards at an early age, you will be better at money management as you age. There is no rocket science behind it. It keeps you disciplined while allowing you to enjoy the privileges it bear.
At the time of writing this post, I am using Credit Cards for almost 4 years, and without a single default or late payments. I have become much more disciplined at money management and I keep proper records for every expenditure I make.
If I only used Debit Cards, probably I wouldn’t care about my month-to-month spends at all and just look at my bank balance as a benchmark for my spends.
Safety:
Amongst all the points I mentioned, this is the second most important to me, after the first point where I mentioned about a single statement for all expenses.
Imagine your Debit Card is compromised. Your real money from your bank account will vanish. You file a legal complaint and submit it to your bank, your bank takes 2-3 weeks to investigate it and finally credits back the money to you. During that time, you have to live with uncertainty. If it is a big amount, you might as well have to borrow money temporarily to make your ends meet, since it directly axes your savings!
However, if your Credit Card is compromised, you file a chargeback and do the same formalities. You still wait for 2-3 weeks to get it resolved. But the difference here is that your Bank Account is not empty like in the previous case. Some high-end credit cards offer complete insurance against unauthorized transactions that automatically refunds back money within days of filing a chargeback.
At this moment, I could only list the following advantages. If you have some more benefits to share, don’t forget to drop a comment below! Also, don’t forget to check the Disadvantages of Credit Cards.
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