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The fact that, according to RBI, over 6.03 crore credit cards were in circulation within the country by the end of 2020, speaks volumes about the sheer popularity of the cashless payment tool. And rightly so! The numerous advantages of owning a credit card surely make it a treat to get one and use it for all your transactions. If you are someone capable of demonstrating financial discipline, you should definitely consider applying for a credit card. To understand why that will be a wise decision let us look at the different credit card benefits you can enjoy.
What are the Financial Benefits of Owning a Credit Card?
A credit card can help you improve your financial health in several ways. Some of these ways are listed below-
Build Your Credit Score
Using funds on a credit card is similar to availing a loan. As a result, transactions on the credit card are also considered for the calculation of credit score. As credit card bills do not attract an interest charge if paid in full within the interest-free period, it is a great tool to build a great credit score. As long as you keep your credit utilisation ratio low and pay your dues on time you can enjoy a decent credit score of 750 and above, which can improve your chances of getting approval when applying for a new credit card or a loan in the future.
Save Money
Credit cards usually come with a range of incentives to make purchasing both convenient and rewarding. These include the opportunity to earn reward points, vouchers, cash backs, etc., as well as purchase at discounted rates. You can choose a credit card based on your monthly purchase pattern which would allow you to exploit the credit card benefits to the fullest. However, as reward points tend to expire, make sure that you redeem the accumulated points against the offers listed in the reward catalogue of your card issuer before they expire.
Enjoy an Interest Free Period
Purchasing on a credit card attracts an interest charge. However, there is a period between the date of the purchase and the payment due date when you are not charged any interest. The time frame may vary from bank to bank; however, it usually ranges between 18 to 55 days, depending on the transaction date. As a result, to preserve your cash flows for a longer time, it is best to time the purchase of expensive items at the start of the billing cycle. If you own multiple credit cards, you can also opt to spread your transactions across various cards and make the most of the interest-free period of each card.
Power of EMIs
Credit cards allow you to convert your credit card bills into equated monthly instalments if you are unable to pay your credit card bill in full. You can also convert specific transactions on the card, such as big-ticket items that are difficult to repay in one go, into EMIs. Once converted, you can repay the amount over a convenient tenure which usually varies from 6 to 60 months. Most banks have tie-ups with merchants and manufacturers to make EMI available at no cost or low cost. You can also enjoy additional cash backs and discounts on select products when you enjoy if you opt for the EMI mode of payment.
Pre-approved Loan for Quick Disbursal
In case your credit history, consisting of both borrowing and repayment patterns, is good, the bank may offer you the opportunity to avail pre-approved loans on your credit card. Such a loan does not require you to submit additional documentation and is usually disbursed within a few hours, making it ideal in case of an emergency. While in most cases, the loan is offered against the available credit limit on the card, the bank may in some cases issue a separate, higher valued loan that will not affect the credit limit on the card.
Apart from the generic financial benefits, credit cards also offer specific benefits which can help you make the most of even your everyday transactions. However, to enjoy these benefits, you need to have the right card. For this, you can research your options from popular credit card apps such as the Finserv MARKETS app. Such an app, besides giving you the option to apply for a credit card, offers a detailed account of the features and advantages of each specific credit card. This can help you understand your option better and make an informed choice.
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