With the increasing credit card use, there has been a fear of falling into debt traps. Well, whether to save money from a credit card or to spend more- is entirely in your hands. Cutting up your credit card is never the solution because the credit card is not the problem. The lack of financial literacy is what causes people to fall into debt with the use of a credit card. When you buy a credit card for yourself, you must be aware of how it works and how you can make the best out of a bad financial situation using a credit card.
In this blog, we will talk about how a credit card will help you save on your expenses, instead of adding to them.
Credit Card Features
Let’s first understand what is a credit card and what are the important features of a credit card that you should be aware of-
- Secure financial tool
Credit cards are secured financial tools that help you make payments for purchases made online and offline. Credit cards can be used to make payments for a wide array of products and services. To ensure the safety of transactions, credit cards have in-hand security features and have multi-factor authentication. Hence, you can freely make online and offline payments using a credit card.
- Credit limit
When you apply for a credit card, you will be given a fixed credit limit depending upon your income. This credit limit is the maximum amount that you can spend using your credit card. The issuer of the credit card determines your credit limit depending upon your income level and your previous financial history. You must note that the better your credit score, the more will be your credit limit.
- Variety of options
Credit cards are available in various types. You can choose one depending upon your specific needs for buying the credit card. A few out of all the available credit card options are-
- Shopping credit cards- Provides benefits on online and offline purchases
- Travel credit cards- Offers reward points on expenses made on travel bookings, etc.
- Fuel credit cards- Saves on expenses made on fuel surcharge waivers
- Student credit cards- These cards have a very low credit limit and are a good tool to learn financial management for students
- Secured credit cards- These cards allow you to make benefits from attractive interest rates against fixed deposits
- Cashback credit cards- These cards offer cashback to a specific amount on the expenses made using the credit card
- Grace Period
A grace period of a credit card refers to the time period in which you should make the repayment of your credit amount. If you make the payment of your credit card bill within the grace period, you would not be charged any interest on the billed amount. However, if you delay the repayment of this amount, you will have to bear high interest charges. You must note that you get a time period of around 40-45 days to repay the billed amount before you are charged any interest.
- Expenses on credit card
As you buy a credit card, you might have to incur a few expenses on your card. These expenses include an annual fee on your card, interest payments upon delayed credit repayments, foreign transaction fee, cash withdrawal charges. It must be noted that not all credit card companies charge for all these expenses; however, you must check for each one of these before applying for a credit card.
- Global acceptance
Credit cards are a financial tool that is accepted worldwide, without any additional international fee (may be applicable in some cases). This makes it easier for the credit card holder to make purchases from anywhere in the world and still benefit from the expenses made.
- Balance Transfer
Repaying the credit bill of an existing debt using a credit card is called Balance Transfer. This means that if you move the balance of one or multiple credit cards to another credit card, you are transferring the balance of one card to another. Now, since the balance is transferred, the interest charged on this balance will now be subject to the rates of the new card. In some cases, you may get a zero-percent introductory interest balance transfer; however, in some other cases, you may also be charged a fee for transferring the balance.
Credit Card Benefits
Considering the growing demand for credit cards worldwide, it is evident that the benefits of having a credit card outweigh the negatives. Letâs take a detailed look at the reasons why you must have a credit card-
- Easy repayment options
One of the most amazing features of a credit card is that it allows you to repay the borrowed amount easily. You can opt to transfer the billed amount from your debit card to easily make the payment of your credit card bills. You can also use another credit card to transfer this balance and make payments. Additionally, you can choose to convert your billed amount into affordable EMIs, which can be easily paid over a specified period of time.
- One card for every need
Credit cards come in various options- one for every need. For instance, if you are an absolute shopaholic, and are always on the lookout for discounts and cashback on shopping, then a shopping credit card would be ideal for you. Similarly, if you have to travel a lot on your own vehicle, then a fuel credit card would work out the best for you as it offers fuel surcharge waivers on fuel spends. On the other hand, if you are a traveler or a businessman, then a travel credit card or a business credit card would be right for you.
- Earn rewards and points
Transactions made using a credit card will help you earn reward points, which can further be used on the next purchases. Each purchase will give you various discounts, cashback, or reward points that you can redeem later. This will help you save on your expenses in the long run.
- Easy approvals
The credit card application process is an easy task. With the increasing popularity and demand, credit card approvals have become a hassle-free process. You can easily apply for a credit card and get approved for it, using both online and offline processes. All you need to do is fill out an application form and submit a few documents required for a credit card as verification proof for your identity, residence, and income.
- Increased purchasing power
There may be times when you don’t have sufficient funds in your bank account as much as you need them. In such cases, credit cards come to your rescue. Having a credit card increases your purchasing power by providing you with enough funds as and when you need them. This also helps you in meeting any emergency medical or other expenses.
- Improves financial health
Having a credit card, and paying the credit bills on time helps improve your credit score. A credit card with a good payment history helps you maintain a good financial status for a long time, thus increasing your credit score. This also makes it easier for you in case of any loans in the future.