AGGRESSIVE private sector banks have cashed in on the booming economy that affords us better income. A younger demographic with clear lifestyle aspirations, a plethora of consumer products (with malls and superstores to buy them) and a 'live for now' attitude have been effectively tapped to promote the use of credit cards extensively.
Now using cards have many undeniable advantages, but they do have their downside too. Let us study both.
Advantages
No need to carry cash
Carrying large amounts of cash is inconvenient. Besides if you are robbed, your money is gone, which is not necessarily the case with cards. Further, there are situations (some airlines, online purchases/ trading etc.) where cash is not acceptable. Here, credit cards offer a safe and convenient option.
Purchasing Power
You can buy stuff with money you don't have. No need to wait and accumulate money for an expensive purchase – just use our card, and pay in convenient installments. This is purchasing power and convenience.
Free credit
Most cards offer an interest-free credit period. Depending on the date of purchase this can vary between 20-50 days. Say your bill dated Oct 12-Nov 11, is payable on Nov 30. Now if you bought something on Nov 11 you get 20 days free credit, and if your purchase was on Oct 12, you get to enjoy about 50 days. Thus, if planned properly, you can enjoy maximum credit every month.
Quick help in emergencies
Credit cards are extremely handy in emergencies. It could be a medical emergency, a car breakdown, an outstation trip on a short notice etc. No need to run around trying to borrow money from your friends/relatives.
Free Offers
Credit cards offer many discounts, promotional offers, reward points etc. The idea here is to maximise your spending. But if you plan your purchases and dues on time, you can get full advantage of these offers, and still not fall into the debt trap.
A parallel record
Credit card bills become a consolidated statement of your purchases. These bills can help you with your budgeting by giving you insights into your spending patterns. Also, if you purchase a product that turns out to be defective, you can ask for replacement/ compensation even if you misplace the original receipt.
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