Is Credit Card worthy to keep?

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A credit card is a type of plastic money which helps us to do online shopping, online payments and withdrawing cash from ATM.
 

  • Advantages:
  1. It relieves us of the risk of carrying cash.
  2. It provides a free credit period of 20-50 days.
  3. We get a record of transactions.
  • Disadvantages:
  1. It has an interest rate of 36-40% p.a. which is very high compared to normal loans when the payment gets defaulted.
  2. It has many hidden charges, annual maintenance charges and transaction charges.
  3. If the payments get defaulted then our CIBIL score degrades which is used by banks to provide loan. A good CIBIL increases your chances to get loans easily at lesser rates.
  • Is Credit Card good or bad?
It totally depends upon how you use it. But we should keep a Credit Card to avail its benefits keeping in mind our financial position in minds. We should not spend a large part of our earnings through it as if we will default then we will have to a very high interest rate.
  • Precautions:
  1. Never exceed your payment capacity or credit limit.
  2. Always pay the full amount due on time.
  3. Don't get in the trap of minimum amount due.
  • Tips to use Credit Card efficiently:
  1. Pay your credit card loan first before any other  loan.
  2. Do not withdraw money from ATM using Credit Card unless extreme emergency is there as interest rate is charged from the date of withdrawal with no free credit period.
  3. Use 2-3 Credit Cards to get benefits of extra discounts, offers and credit period but not more than that as there are more chances of defaulting.
  4. If running out of cash take any other type of loan at a monthly EMI to pay credit card bills as there are less interest rates and longer loan period.
  5. Make more payments only through cash rather than any other digital mode as we do not realize how much amount we spent through online mode but when cash goes from our hands we realize its worth.


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