Not only does a credit card get rid of the problem of carrying cash, but it also has some special benefits.
Credit Card: According to the data of the central bank RBI, there is a rapid increase in credit card transactions at ATMs and shopping places. These figures show that credit card users have increased but still many people shy away from having credit cards for fear of overspending and falling into the debt trap. However, if the credit card is used wisely then it can prove to be very beneficial for you. Not only does a credit card get rid of the problem of carrying cash, but it also has some special benefits. Let us know about some such special benefits due to which you should end the hesitation in adopting a credit card.
Helpful in building a strong credit score
A credit card transaction is a kind of loan, so repayment of credit card dues is as effective as a loan. Just as your credit score is prepared on the basis of loan repayment, so is your credit score. Although credit cards do not carry any interest for a period of time, credit cards are a cheap and convenient way to build up your credit score.
You can clear your credit card dues on time and build a strong credit score by keeping the credit utilization ratio between 30-40 per cent. A higher credit score increases your chances of getting a loan at a lower interest rate.
Reward points and cashback benefits
Using a credit card, you get the benefits of reward points, gift cards and vouchers. Due to all these offers, your overall cost of doing transactions through credit cards comes down.
Reward points, discounts, cashbacks, vouchers and other similar benefits should also be taken into account while selecting a credit card instead of choosing a credit card on the basis of annual or renewal fee only.
One more thing to keep in mind that redeem the rewards points from time to time as most of the credit cards also have an expiry date.
No interest on credit card transactions for some time
When you pay a bill with a credit card, you get an interest-free period for repayment. During this period, you do not have to pay any interest and during this period you can clear your entire dues without any extra expenses. This period ranges from 18 days to 55 days. It is prudent to spend bigger than that on the initial day of the card’s billing cycle as you get a longer interest-free period.
Facility to convert large expenses into EMI
Due to lack of cash, the purchase of expensive items like laptop, television or smartphone sometimes gets pending for a long time. In such a situation, the EMI facility of credit card is of great use to you.
This gives you a tenure of up to 3-48 months instead of paying small taxes through EMIs instead of spending a lump sum for your big expenses. On this, you have to pay interest at the rate of 1.5 percent monthly.
However, sometimes you do not even have to pay any additional interest on it. Banks also give you the option of EMI to repay the outstanding credit card balance. You can get up to 60 months for this.
Instant pre-approved loan for emergency
Credit card holders can also easily get pre-approved loans in case of emergency. However, for this you should have a good record that you have been paying the old bills on time.
There is no documentation in a pre-approved loan, due to which it is processed quickly. Sometimes it’s instant and sometimes it just takes a few hours. However, this type of loan may attract interest at a slightly higher rate than a personal loan.
