Credit cards often referred to as plastic money, are payment instruments which allow the user to borrow money within the stipulated credit limit towards making payments for purchases and transaction. The borrowed amount needs to be repaid before its due date, and the cardholder can opt to repay the borrowed amount in installments or lump sum.
Advantages offer by Credit Cards
No Need to Carry Cash
Credit cards reduce the need to carry cash as it allows the cardholder to make payments for almost every form of purchase, from shopping to dining to entertainment. Credit cardholders can also make online payments and transactions using their credit cards.
Helps in Meeting Emergency Expenses
Emergencies can come without intimation, and certain expenses, such as emergency medical expenses, cannot be postponed or avoided. Credit cards can come in handy in such cases, especially when you are short of funds.
Enhances your Purchasing Power
A credit card allows users to spend more than they earn. As cardholders can pay their credit card dues in installments, one does not need to compromise their spending during the holiday season or vacation due to a shortage of cash.
Interest-Free Credit
All credit card offers the cardholders an interest-free period wherein no interest is charged on the money borrowed by them. Interest is charged only on account of credit card due to being paid to post the due date of the payment.
Rearward Points and cash backs
Many credit cards offer reward points and cash backs when the cardholders use their credit cards to make payments. These reward points can be acquired and redeemed in the future to avail benefits such as discount coupons, free purchases, etc.
Building a Credit History
Credit Cards helps you build a credit history when you do not have any other forms of loans. When a cardholder repays their credit card dues on time, they create a good credit history, which is reflected in their CIBIL score. This credit history is vital at the time of applying for loans as most banks and financial institutions can reject a loan application purely by their CIBIL score and credit history.
Helps Tracking Purchases and Spending Habits
Using a credit card for making payments allows people to track their purchases and spending as the credit card statements provide a detailed list of transactions incurred by the cardholder. This ability to track purchases and spending habits can help the cardholders to analyze and control their spending habits.