Most people who claim to be financial experts will always tell you to stay away from credit cards. They will tell you that it is the first step in the debt spiral. And this may have a smidgen of truth. But only if you don’t use it wisely.
When used well, a credit card is a tool of unparalleled financial flexibility. But this isn’t the only benefit of applying for one, there are quite a few more.
Here are some of the reasons why applying for a credit card is a good idea.
Builds Credit History
One of the biggest advantages of a credit card is that it lets you build credit history. And good credit history is the foundation for a good credit score, which in turn helps you when you apply for a home loan or a car loan.
It’s not only a great tool for people looking to improve their credit score but for those who have no credit history as well. A lack of credit history means that most banks will be unwilling to lend large amounts of money to you. Even if they do, the terms may not be in your favour. This is because, due to a lack of credit history, banks have no indication of whether lending to you is a risk or not.
In such cases, getting a credit card and using it responsibly for a period of time is an excellent way to build credit history.
There is no denying the fact that carrying a card is way more convenient than carrying oodles of cash. Especially when you are travelling. Think about it. It’s quite difficult to keep track of how much cash you have and how much you have spent while on holiday. But with a credit card, all of that becomes simple since you can access all the information on your phone or on the bank’s internet banking portal.
Then there’s the fact that you don’t always have to carry foreign currency when you are travelling overseas if you have a credit card. Moreover, if cash gets stolen, you can at most file a police complaint and hope that you get your money back. But if your card is stolen, you can immediately call your bank and get the card blocked. This way you are not liable for unauthorised transactions.
Get Rewarded for Your Spending
If you have a credit card, then the first thing you probably did before applying for it was to see what the rewards on the card were. So, you probably checked to see if the card gives you points or cashback for every Rs.150 or Rs.200 that you charge to the card.
If you have a cashback card, then the cashback you get can be used to offset your statement, so you end up paying less each month. On the other hand, if you have a card that gives you rewards points, you can redeem them for products and vouchers. Alternatively, you can transfer your points to an airline’s frequent flyer programme and fly for free once you have collected enough points.
The bottom line is that credit cards open a door to numerous perks and rewards. You do, of course, need to know how to make the most of it, however. A good rule of thumb is to ensure that your credit card complements your spending pattern.
This means that if you spend more on online shopping than you do on shopping at a departmental store, get a card that provides the highest rewards for online transactions. This way you will be able to earn points at a rapid pace.
Enjoy a Host of Perks
As mentioned earlier, rewards aren’t the only benefits you get when you apply for a credit card. Depending on the type of card you apply for, you also get a number of perks.
For instance, travel credit cards come with complimentary air accident insurance and some even provide you with a complimentary stay at a hotel each year. Others have perks such as free access to airport lounges across the globe.
The best part is that almost all credit cards come with liability protection. This means that if unauthorised transactions are made using your card, you won’t be held liable for them.
The Ability to Buy Now and Pay Later
Ever been in a situation where it is the end of the month and you have finally found that one product you have been looking for but have no money to buy it? Well, here’s where a credit card comes in handy. You can make purchases today and make payments once you receive your monthly statement. Typically, all credit cards come with a grace period that can range from 30 to 50 days. This is also known as the interest-free period. So, you have time to get money in place to make the payment on your card.
In fact, having a credit card especially during an emergency is always a boon.
As you can see, applying for a credit card is a good idea. It has numerous benefits. But only when used well. Which means that you must make sure that you pay your bills in full and on time if you don’t want to end up paying a high rate of interest on your card.
That being said, you really should go and apply for your credit card today. Start with a low credit limit if you are not too sure and then see how it goes from there. It will teach you how to manage money and you won’t regret it.