Namaste!!
According to Google credit card is something issued by financial institutions that give the customer a pre-set credit limit of money which he can use for his purchases and payments without having to pay in cash or cheque.
But according to many of us, it’s nothing but a card which we use to spend money which we haven’t earned yet. Well, partially correct. But what if I tell you it has more pros than cons?
First and foremost, a credit card gives us 50 days of interest-free money. This means that we don’t have to pay any interest on the credited amount for 50 days (billing month + 20 days). For example, your billing cycle is from 1st of January to 31st of January, after that your bill would be generated on the 1st of February and you have to pay the credited money back within 20 days i.e. 20th of February. This is how we get approximately 50 days of interest-free money.
At the same time if you are a smart user, you can keep the same amount of money in your savings account and earn interest in that by the bank.
In simple terms, you are using the bank’s money without any interest and getting interest from the bank on that same amount by using credit card instead of paying directly.
Apart from it, regular repayment of credit can help us to increase our CIBIL score, which displays your timely repayment of credit to the bank. Hence, it makes your path easy to get big loans from a bank.
Credit cards are also a great way to reduce damage by online frauds. As credit card has some certain limit, the fraudster wouldn’t be able to use as much money as he can in the case of debit card (i.e. your savings account).
Now, you must be thinking, why do we get so many calls from banks to get their credit card if we are the only ones who are getting benefits from it? Yes buddy, everything is not bright with credit cards. There are many downsides that we should be aware of.
As we know that we get interest free money for 50 days, but after that period banks put heavy interest on due payment. Those interests are as high as 36% to 40% per annum, and this is the way how financial institutions make money out of credit cards. They want us to default our payment! Due payment also affects our CIBIL score and it goes without saying.
At the same time, banks give you an option to pay the minimum amount as 5-10% of your credited money and carry forward remaining money. WOW! right? “We will charge you 40% as interest on unpaid money” was silent in that.
So, in short repaying the whole amount within 50 days is the only wise way to use a credit card. Spending less than you earn holds true here.
Many times, people use the credit card as an ATM card to withdraw cash. No no, it won’t block your card, you will get your cash but with some high transaction charges and bank’s favorite 40% interest.
I hope, I have changed your perception towards credit cards. Use them, use them wisely. Cheers!
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