Is a Credit Card Really Necessary?

Who does not like free stuff and credit card companies promise you to provide you with plenty of free stuff some companies provide free movie tickets, some provide you with discount coupons, and some provide free goodies from different brands. Apart from this, you also get a sense of maturity when you own that plastic money when it’s time for payment, and you pull out your wallet and say, “I’ll pay by card.” Don’t you feel so sophisticated and mature while doing so? But are all these feelings worth it? Do you require a credit card, or are you just attracted to it because companies market it in a way to attract wanna-be gentlemen? This article will provide all the necessary information and help you decide whether or not you require a credit card. So, let’s take a look at the pros and cons of credit cards.

Benefits of Credit Card

Whenever a credit card company approaches you, they will always pitch you the best offers or the most attractive benefits that you will receive when you register for their Credit Card. Let’s take a look at some of the benefits that these companies promise to provide you:

Internet Purchases

Whenever you purchase something on the internet with the help of your credit card, you always receive attractive discounts that can save you a lot of money E.G., An Extra five percent off when you purchase with your credit card, no-cost EMIs, etc.

Rewards Program

Whenever you do a transaction with your credit card, you receive a few reward points in exchange for that transaction which you can redeem in the future for heavy discounts.

Benefits for Employees

The employees who pay on behalf of their company could receive a lot of benefits from the credit card company. It is a good idea for those employees to do all the payments from their credit card as for doing those payments they will receive some benefits in the form of cashback and rewards. Since your company will be doing the payments, therefore you would be receiving all these benefits without actually spending a penny. 

Tracking Expenditures

If you are one of those, who only use cash for the payments, you are bound to have a hard time when you sit down to track your expenditures. A credit card helps you track all your transactions with ease, as you will receive a statement on your email which will provide you with all the information about your expenditures which will help you to prepare a budget for the next month to handle your expenses.

Insurance

Many credit card companies provide you with insurance when you make payments from your credit card. Let’s understand this with an example, suppose you bought a mobile with the help of your credit card, your credit card company will automatically pay for your mobile insurance, and you will no longer be worried about the wear and tear of your mobile phone. 

Convenience: I don’t think I need to explain this point. You don’t need to carry a lot of cash with you when you own a credit card. 

Drawbacks of Credit Cards

Let’s take a look at the disadvantages of credit cards, and trust me, there are much more cons of credit cards than pros.

High Rate of Interest

Credit cards are a loan that is provided to you by the company, as you have to repay the company at the end of every month, but when you don’t repay the company within 45 days, the average rate of interest of a credit card is 40% per annum, and this is the highest interest rate on any loan, even education loans are provided, at the rate of 12%. Hence, it is recommended to pay your credit card bill before the due date. 

Credit Score

If you delay the payment of your credit card even by the slightest, your credit score will be damaged, and when in the future you apply for some other loan, you will be required to pay a higher rate of interest on your loan, or even your loan application might get rejected because of your Low Cibil/Credit score. Credit score can be defined as your marks; just like colleges reject or select you based on your school marks, the banks also decide whether to provide you the loan or not by looking at your credit score.

Hidden Charges

The worst nightmare of every Indian consumer is hidden charges, the community that even hesitates to pay the delivery charge for their online orders, how can they tolerate the hidden charges but, this is the bitter truth whether you like it or not, credit card companies apply any hidden charges. Some of the charges are maintenance fee, late fee, transfer of limit fee. Every service that the credit card company provides you has a fee to pay.

Terms and Conditions

The companies do everything in their capacity to make sure that the customer ignores the terms and conditions of the credit card. Companies promise that their rate of interest will be constant throughout your usage. But they very smartly mention in their terms and conditions that they reserve the right to increase the rate of interest if you delay the payment too much. You cannot even file a case on the company as you have already signed the terms and conditions of the company without reading them properly.

Not used for Investment

You never buy an asset with your credit card. It is because you treat the credit card just like you treat your hard cash and even companies want you to buy liabilities from your credit card by providing you with attractive offers on your liabilities and hence you never actually earn anything from your credit card.

Credit cards encourage you to spend more than your capacity. It is because many people treat credit cards as a backup after spending their hard cash, and hence, 90% of the people end up spending more than what they earn.

Conclusion

Now that I have mentioned all the pros and cons that a credit card comes with. Now, it is up to you to decide whether or not to own a credit card. See, the credit card is just like fire; If you use it wisely, it will provide you with warmth and light, but even the slightest mistake can burn down the jungle. Hence, if you own a credit card, use it wisely and if you don’t, read all the pros and cons mentioned above and decide will it be a wise decision for you to own one or not.

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