If you use a credit card wisely, you can get good discounts on products, Interest-free money, better credit score, etc. A credit card is still treated as a luxury item, not like a debit card. However, now the banks are more flexible and getting a credit card is easier than ever.
Don’t get fool
Today in India, several banks are running, including both PSU and the private sector. Before applying or getting a credit card, know every detail about the different charges like the Annual fee, late fee, processing fee, etc. Additionally, don’t waste money on those expensive “Platinum”, “Diamond” kind of card if you can’t take advantage of them.
Avail discounts
To promote credit cards, banks are partnering with e-commerce companies and brands like Amazon, Flipkart, Samsung, etc. So, purchase any stuff or a specific product using a credit card in their platform gives you 10% – 15% discounts, cashback, etc.
Banks are now partnering with e-commerce companies (Amazon, Flipkart) and different brands. So, buying any stuff or a specific product using a credit card in their platform can give you 10% – 15% discounts, cashback, etc. Especially during festival time and important days. However, offers are depending upon the banks, and these offers are not always available.
Credit card for No Cost EMI
No cost EMI is very popular in credit card. No-cost EMI means pay monthly as per your plan that too without interest. Generally, No-cost EMI is limited to few months, like up to 3 – 6 months. Moreover, some banks can charge a processing fee to convert the product amount into No-cost EMI.
In case you need long-term EMI, a regular interest plan is also available. Although Debit card EMI is available but it is not often and limited to a selected bank.
Get 50 days of interest-free money.
If you spend wisely from a credit card, you can avail 50 days of interest-free money. The time gap between the date of billing and the last date of payment is 50 days. The billing cycle is 30 days, and 20 days for payment, so a total of 50 days. Therefore, spending on billing date or a day after gives you almost 50 days to repay that too without interest.
For instance, you spent between JAN 1 – JAN 29, the billing date is JAN 30, and the payment last date is FEB 14. Calculate your billing cycle and payment cycle to spend more effectively.
Do not miss your credit card bill payment at any cost. Apart from the late fee, the bank charges high interest in your outstanding bill amount, that too on a daily basis.
Avoid minimum amount payment.
While going through the credit card statement, you may have noticed the minimum amount due. The minimum amount due is much less than the actual outstanding payment amount.
The minimum amount is 5% of the total outstanding amount. If you have converted any payment into EMI, that amount is also added to the minimum amount ( EMI amount + 5%). Banks recommend paying at least a minimum amount to avoid late fee penalty, and you can keep your credit active. Besides, the bank will not classify your payment as a ‘default’ in the credit record.
Paying minimum balance means the remaining amount is carry forwarded for the next billing cycle, that too with a high interest rate daily until you pay. Avoid the minimum balance amount payment. Always pay the entire outstanding bill amount.
Benefiting the Credit Score
A credit score shows an individual’s creditworthiness. In other words, it means an individual’s ability to repay the loan amount. A higher credit score indicates a better ability to repay a loan. Additionally, it can help you to get faster loan approvals.
Paying the credit card bill on time show your capability of paying, and banks can trust you. A credit card’s credit limit is a kind of interest-free loan for 50 days. Thus it helps to build a good credit score if payments are on time.
By using a credit card, not only you are getting an interest-free loan for 50 days but also an opportunity to build a good credit score. Don’t forget the dark side of credit card that is the high interest rate if you miss a payment.
Final verdict
Don’t fall into the debt trap of credit card. Always analyse your spending and know when to stop. Unnecessary using the entire credit limit is not a good idea until you need it urgently. Likewise, spend which you can pay actually.
By using cautiously, you can enjoy lots of good feature in a credit card that we have already discussed. Beware of online frauds.