What is Credit Card ? | The Benefits of using Credit Card

Credit card

What is Credit Card ?

Credit Card is a financial instruments issued by banks for your help & encouraging you towards cashless transactions by giving some rewards & offers . Credit card has pre-decided credit limit under which you can purchase goods & services provided by the company .

Why you need a Credit Card ?

Suppose you go to shopping mall and purchase something according to you need by using your credit card and come back to your home . You will experience that whole the process is so much easy that anyone can enjoy this . If you have no money in your bank account but you have a credit card then you can go for shopping without any hurdle . You don’t have to go to the bank for taking borrow and explaining the purpose of borrowing money . You have to use your credit card and purchase anything according to your   requirements . Thus credit card has changed the way of shopping . You may use your credit card for purchasing goods & services .

There are several types of credit card that issued by banks & financial institutions and it is widely acceptable . You can purchase groceries , cloth , online shopping , booking airlines tickets , movie tickets , paying utility bills & many more .

Advantages & Disadvantages of Credit Card :

Advantages :

#1. Buy on credit :

The most attractive feature of Credit Card is its Credit Limit . You can buy anything within this limit and pay later . If you have purchased some high value goods then you may convert the total amount into EMIs and pay easily into monthly installments . This facility makes shopping experience better .

#2. Widely acceptable :

Due to widely acceptable nature of credit card you may travel anywhere without carrying so much cash  with you . As it is widely acceptable so you can pay for anything you have to purchase .

#3. Cash withdrawl without interest :

There are some credit card issued by banks and financial institutions that allow you to withdraw money up to certain limit in case of financial emergency & they do not charge any interest up to 45 to 50 days . You should only use this facility in case of financial emergency because if you are unable to pay on time then bank will charge high interest rate .

#4. Insurance Coverage facility :

You can also avail insurance coverage facility by using credit card . You can get personal accident coverage , Travel insurance coverage , etc. This is the most significant benefits of credit card which also makes it more significant .

#5. Improving CIBIL Score :

As you may enjoy several facilities such as shopping expenditure , Service facility , cash withdraw & many more by using credit card . In stead of these facilities , it also helps to improve your CIBIL Score , if you know how to improve and repay your used amount on time . Better CIBIL Score helps you to obtain personal loan , home loan , car loan etc without any difficulty .

Also Read : How to Improve CIBIL Score ? 

#6. Discount & Offers :

Most of the company (which issued credit card) provides discount , offers , incentives to use your credit card . Some companies also offers  discount on booking Air ticket , holidays booking , high value shopping etc through using credit card .

#7. Make Travelling safe :

Credit card makes your travelling safe because you have not to carry much cash . You can reserve a vehicle , book a room etc by using credit card . If there is no sufficient funds in your bank account , credit card increases your purchasing power .

Disadvantages :

You should aware that like most other financial products , credit card has many benefits if you use it responsibly . You should pay all your used amount within given time frame , otherwise company will charge high interest rate & it will hamper your purchasing power , CIBIL Score etc. So be careful !

(i) High Interest rate: If you do not pay credit card bill on time , then bank will charge high interest rate (2.5 % to 3 % monthly ) .
(ii) CIBIL score will fall due to delayed payment of credit card .

How to Choose best Credit card :

(i) Low interest rate

(ii) No/Low Annual maintenance fee

(iii) Low issuance charges

(iv) Suit your expenditure pattern
(v) Reward & Offers