Advantages and Disadvantages of Credit Card

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Advantages and disadvantages of credit card
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• As with anything in life, even your credit card
  carries its own set of advantages and
  disadvantages. We have tried to bring out the
  brighter as well as the darker side of owning a
  credit card to help you manage your finances
  better. Lets start off with focusing on the
  brighter side.
• Chance to earn extra return on your cash balance
• Save the hassle of carrying around cash
• Borrow for Free
• Awesome perks in your pocket
• Online purchases
• Easy EMIs
• Insurance
• Consolidated Bill Payments
• Budgeting
• Repair your credit history Build a positive
  credit score (CIBIL) easily

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Chance to earn extra return on your cash
balance With credit cards, you have an
advantage of possessing higher average monthly
balance in your bank account, leading to earning
extra interest income for anywhere between 30 to
45 days. Lets say that your billing cycle runs
from 12th to 11th of every month. Then, the
expenses from the current month would be billed
on 11th of next month. And, if your payment due
date is on 30th, then you still have two more
weeks to make the payment. So on an average, you
end up earning 45 days extra interest every
period. Save the hassle of carrying around cash
With credit cards around, you dont need
to look carry cash around for your weekend
shopping or wedding purchases. There is always a
chance that might get pick-pocketed with a less
than 1 chance of getting hold of the
pick-pocketer. With credit cards, you can
immediately call up the hotline and block the
card. Also, in cases of prompt reporting of a
lost or stolen card, youre protected against any
unauthorized usage. Apart from credit cards there
are also e-wallets online wal lets that allow
for quick payments. For example Citibank has tied
up with Mastercard to launch CitiMasterpass to
allow for one click transactions. There are also
wallets like Momoe, PayTM, etc which help in
this.
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Borrow for Free If you need to buy something
urgently but your cash is expected to come over
after a week or two, you can easily swipe your
credit card to go ahead with the purchase,
without any extra cost. It saves you the hassle
of going for a bank loan, which again would take
at least a day or two to process even in this age
of insta-loans. Some credit cards also offer 0
loan with the interest part as a cash back as
long as you payback the amount within the
stipulated period. Awesome perks in your
pocket From frequent flyer miles and
accelerated rewards to big discounts at
restaurants, shopping outlets ecommerce sites
credit cards pamper customers to the hilt. The
catch often is to find the right card that caters
to your purpose and at the same time offers the
perfect mix of benefits. For example, if you are
a frequent business traveler or you love taking
vacations then the Citibank Premier Miles Credit
Card would be the right choice as it is one of
the best travel credit cards in India. It offers
a wide array of rewards and privileges such as 10
miles for every Rs. 100 spent on airlines
preferred merchant outlets, upto 20 discount at
over 2000 restaurants across the country and 4
miles for every other Rs. 100 spend. The miles
offered are never-expiring and airline agnostic
so doesnt matter where your plan your next
vacation, you can always use those miles.
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Online purchases With the boom of ecommerce,
credit cards have become more important. Credit
cards are easier to pay for your online purchases
with the benefit of easy EMIs and Extra Discounts
at your banks partner portals. Many credit cards
and online wallets (linked with your credit card)
also offer cashbacks on your online spends, thus
making your shopping go lighter on your
pocket. Easy EMIs Be it an offline retail or an
online purchase, credit cards allow you to easily
convert your purchases into easy monthly
installments with the click of a mouse.
Especially for large value transactions EMIs can
help take the burden off from your monthly
expenses. These EMIs come at a flexible interest
rate. Now compare that to the paperwork involved
in getting a personal loans.
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Insurance Your credit card can make your lifes
emergencies easy on you, as long as you play
within the rules. The best cards in the industry
offer complimentary insurance. For example, the
Citibank Premier Miles Card, which many of the
team members at Finance Coach use offers an air
accident insurance of Rs. 1 crore. Similarly,
many credit cards of leading banks in India offer
complimentary medical insurance or travel
insurance cover. Consolidated Bill Payments You
can set up all your bill payments into an
auto-pilot mode, be it mobile, electricity or DTH
bills and stop worrying about late or missed
payments. Moreover, it also consolidates and
brings together all your billing requirements in
one place. Banks also reward you with points,
miles cashback for activating these bill
payments helping you further save on your
expenses. Budgeting If you use your credit card
regularly for your monthly expenses, then your
credit card statement is an itemized summary of
all your monthly expenditures. Some cards also
provide a year-end summary. You can keep track of
all historic expenditures from your card and list
out the expenses that could have been avoided
directed towards your investment or savings. It
also makes it easier for filing your income tax
returns at the end of the year.
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• Repair your credit history Build a positive
  credit score (CIBIL) easily
• If you are having a poor credit score as per
  CIBIL (click here to learn more about the CIBIL
  score credit worthiness), you can leverage your
  credit card to demonstrate your ability to manage
  credit and repay the credit regularly. You can
  boost your credit score immensely over 1-2 year
  with effective usage of your card. Some key tips
  in that direction would be as follows
• Limit your credit transactions to below 60 of
  the available credit limit
• Pay the due amount completely rather than a
  minimum due payment. Apart from the impact on
  your credit score, you also pay an interest on
  the outstanding amount
• Analyze your requirements and accordingly, limit
  the number to credit cards you own to 4 and avail
  the benefits. Anything above that is not
  required.
• On its website, CIBIL points out that 79 of the
  loans in India are approved for individuals with
  a score greater than 750 so using a credit card
  can be essential in improving this score and the
  prospect of taking up loans in the future.

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• Minor Disadvantages of having a Credit Card that
  need to be managed
• Owning a credit card can never be disadvantageous
  but improper usage definitely can have its
  repercussions. So, lets take a look at some of
  the disadvantages of improper credit card usage
  that can help you develop a judicious credit card
  usage habit.
• Impulse credit card purchases
• Miss the payment cycle you can end up paying
  more
• Hidden charges
• Do your homework well
• Owning multiple credit cards
• Dont spend beyond your means

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Impulse credit card purchases If you are an
impulsive shopper, then foregoing a credit card
cannot stop you from your instinct to shop.
Having cash in your wallet or Debit account can
also support your urge to buy more. Instead,
using your credit card effectively for shopping
can help you get amazing discounts and cashbacks,
which makes youre shopping more rewarding. Miss
the payment cycle you can end up paying
more Its important to remember that payments
made via credit cards is a type of loan, albeit
free for a certain period. Hence, it is important
to pay off the monthly outstanding balance amount
in full. It would prevent any chance of your debt
spiraling off to an unmanageable figure. Missing
multiple payment also impacts your CIBIL score
and future credit worthiness which can have a
very negative impact on future loans and credit
card approvals.
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Hidden charges Interest rate on outstanding
balance is not the only charge in a credit card.
Most credit cards charge a percentage for cash
withdrawal at ATMs. Avoid withdrawing cash on
your credit card as long unless its an
emergency. In cases where swiping your card for
the transaction is not possible, it would be a
better idea to use your debit card for cash
transactions. Also, beware of penalties for
exceeding the credit limit. This can also lower
your CIBIL score. Do your homework well Low
introductory charges and annual fee waiver are
used to entice the customers. It would pay off in
the longer run to dig deeper and read the fine
print in detail. Ensure proper checks for annual
fees, interest rates and cash withdrawal charges,
if any. Do also evaluate the value you get out of
the card you opt for. Sometimes the annual fees
is offset with benefits rewards that justify
the small fee.
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Owning multiple credit cards Owning and managing
multiple credit cards is too much of a hassle.
You not only need to keep track and pay multiple
bills, but it is also tough from a security point
of view. There are chances that you might lose a
card and might not be aware that you no longer
have it. You also run the risk of running small
debts on each of credit cards, and there goes
your perfect credit history in the bin. Dont
spend beyond your means Having a healthy line of
revolving credit can lead you to spend beyond
your means. Analyze and plan your monthly budget
in advance be prepared to account for your
essentials to luxury spends. As long as your
budget is balanced to your means, credit cards
can always be your good friend. Have you ever had
trouble managing your credit cards or need help
with selecting the best credit card based on your
requirements? 
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• Repair your credit history Build a positive
  credit score (CIBIL) easily
• If you are having a poor credit score as per
  CIBIL (click here to learn more about the CIBIL
  score credit worthiness), you can leverage your
  credit card to demonstrate your ability to manage
  credit and repay the credit regularly. You can
  boost your credit score immensely over 1-2 year
  with effective usage of your card. Some key tips
  in that direction would be as follows
• Limit your credit transactions to below 60 of
  the available credit limit
• Pay the due amount completely rather than a
  minimum due payment. Apart from the impact on
  your credit score, you also pay an interest on
  the outstanding amount
• Analyze your requirements and accordingly, limit
  the number to credit cards you own to 4 and avail
  the benefits. Anything above that is not
  required.
• On its website, CIBIL points out that 79 of the
  loans in India are approved for individuals with
  a score greater than 750 so using a credit card
  can be essential in improving this score and the
  prospect of taking up loans in the future.

13

• Repair your credit history Build a positive
  credit score (CIBIL) easily
• If you are having a poor credit score as per
  CIBIL (click here to learn more about the CIBIL
  score credit worthiness), you can leverage your
  credit card to demonstrate your ability to manage
  credit and repay the credit regularly. You can
  boost your credit score immensely over 1-2 year
  with effective usage of your card. Some key tips
  in that direction would be as follows
• Limit your credit transactions to below 60 of
  the available credit limit
• Pay the due amount completely rather than a
  minimum due payment. Apart from the impact on
  your credit score, you also pay an interest on
  the outstanding amount
• Analyze your requirements and accordingly, limit
  the number to credit cards you own to 4 and avail
  the benefits. Anything above that is not
  required.
• On its website, CIBIL points out that 79 of the
  loans in India are approved for individuals with
  a score greater than 750 so using a credit card
  can be essential in improving this score and the
  prospect of taking up loans in the future.

14

• Repair your credit history Build a positive
  credit score (CIBIL) easily
• If you are having a poor credit score as per
  CIBIL (click here to learn more about the CIBIL
  score credit worthiness), you can leverage your
  credit card to demonstrate your ability to manage
  credit and repay the credit regularly. You can
  boost your credit score immensely over 1-2 year
  with effective usage of your card. Some key tips
  in that direction would be as follows
• Limit your credit transactions to below 60 of
  the available credit limit
• Pay the due amount completely rather than a
  minimum due payment. Apart from the impact on
  your credit score, you also pay an interest on
  the outstanding amount
• Analyze your requirements and accordingly, limit
  the number to credit cards you own to 4 and avail
  the benefits. Anything above that is not
  required.
• On its website, CIBIL points out that 79 of the
  loans in India are approved for individuals with
  a score greater than 750 so using a credit card
  can be essential in improving this score and the
  prospect of taking up loans in the future.

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