Credit cards
Credit Cards are a type of modern plastic money. They come with a concept of buy now, pay later. Banks give these cards to the customers with specific eligibility and documentation to use for various personal reasons. By using these cards customers can pay for goods on credited amount by banks. In simple words, bank gives specific amount as credit or loan to the card holders to use for their utility. Customers can use this credit amount for their needs and pay back the borrowed amount to the banks before the next scheduled billing in lump sum or as EMIs. Customers have to pay a specific interest rate on borrowed amount. They are also given a specific limit of amount in which they have to limit their use. You can use a credit card around the world. Banks offer different types of credit cards for different purposes. It’s always a feasible option to carry a credit card instead of carrying a roll of cash. Many prefer credit card over debit card as it allows using the card on credit.
Features of Credit card
Benefits and Features of Credit Card
As discussed above, a credit card allows you to purchase goods and services on credit and pay it back on a later set date. It is preferred over other modes of payment as it eliminates the need to carry cash everywhere.
- To build your credit score : Disciplined swiping of a credit card can help improve your credit score. The reason being, instant credit card issuer companies will report your payment activity to the credit bureaus. However, if you make complete and timely repayment of your monthly bills, it will help improve and build your credit score faster.
- To avail instant loan : You can avail loan against your card if you have a good credit score. You also have the option to convert your purchases in Credit Card EMIs which can be paid during a pre-agreed loan tenure. You do not need any additional documents, while in case of a personal loan, some level of documentation is required. The interest rates of loans against these cards usually start from 11.50% per annum onwards and their tenure can go up to five years.
- To earn cashback and reward points : A credit card also helps you to earn cashback and reward points. These cashback and discounts reduce the cost of purchases. You can also redeem these points to purchase goods or services from partner stores. Hence, doing more online transactions using these cards will help you earn more such benefits.
- To save money on grocery shopping: For many people, grocery shopping is a regular task and therefore, no other option comes into our mind other than using these cards. Most of the cards have been affiliated with supermarkets, which means you can earn some additional cashback or discounts on your everyday shopping. The more you spend, the more you get a discount through these cards.
- To cut the cost of existing debts: The main advantage of using them is that it helps you get out of the vicious cycle of debt that only grows worse over time because of compounding interest rates. If you owe money on an existing credit card, you have the option to reduce the cost by transferring the outstanding balance to another such card which has a lower interest rate.
- To plan an international trip: If you are planning an overseas trip, using the best travel credit card will yield multiple benefits. Nowadays, international credit cards offer a low or no foreign currency transaction fee. Also, some cards offer international customer assistance which is helpful during your much-awaited trip. Plus, a lot of travel-oriented cards offer special discounts on flight tickets, car rentals, hotel bookings, etc.
- To earn free travels and hotel stays: Credit card apply online that offers rewards and perks on hotel stays. You can redeem the points for a free flight or a free hotel stay. You can make the best use of complimentary amenities for an exotic vacation or weekend getaway.
- Helps to save time: A credit card eliminates the need for you to carry cash everywhere. It also avoids the trouble of searching for ATMs and in turn, saves your time of visiting them.
- To track your expenses: Credit cards help you to keep track of your day-to-day expenses. Your statements include the name of the merchant, date of the transaction, and amount spent. Some cards also provide the year-end summary that helps while paying taxes.
Difference between Credit card and Debit card?
| Category | Debit Card | Credit Card |
|---|---|---|
| Credit Cards | You can use the money or funds which are deposited in your account | You can use the money or funds offered by bank as credit |
| Use of the Funds | You can use a debit card only if you have money or funds in your account | You can use a credit card even if you don’t have money or funds in your account |
| Effect on Credit Score | Debit card usage does not impact your credit score | If you pay your credit card bills regularly and on time, this can prove as a good credit score for future financial needs |
| Increase in Card Usage Limit | As the funds you use are deposited by you in the account, there is not fund usage limit | Your credit limit on the cards will change according to your usage |
| Earning Rewards | You can earn reward points for using your debit card and the points can be redeemed to enjoy various discounts | Credit card offers you a large structure of reward points, discounts, cash back etc. |
| Online Transaction | Debit card is not a secured way to transact online as funds or money are immediately debited from account after transaction and if you cancel the transaction, reversal time is of minimum a week | Credit cards are safe to use online as the funds or money do not deduct from your account immediately and you can file a report if any wrong transactions are done and won’t get charged for it |