A credit card allows the cardholder to use a line of credit to make payments instead of the balance in the holder's account. Simply put, it means that you purchase goods or services on credit, and you have to pay it off on a given due date rather than immediately. Credit cards are issued primarily by banks and financial institutions. There are various types of credit cards to suit the customer's needs, offering multiple benefits. Let us explore more about credit cards in detail.
Features of credit card
● Ease of approval: You can use the online or offline mode for applying for a credit card. The eligibility criteria are simple, and so is the documentation.
● Alternative to physical cash: As an alternative to physical money, credit cards are relatively more accessible and more secure.
● EMI payments: A credit card may be used for available EMI payment options for purchases. This has to be repaid over a given period, which is a relatively easy process.
● Cash withdrawal through ATM: Credit cards may be used to withdraw cash from ATMs in case of a requirement. However, it may attract a particular interest and a fee.
● Customization of card limit: The credit card limit is based on factors like age, income, credit score, and credit history, among other factors. Higher credit history and higher scores ensure a higher limit.
● Facilitation of loan during an emergency: Credit card may be utilized to avail a personal loan in case of an emergency.
● Discounts, gifts, and offers: Various discounts and offers are associated with each card. It is better to gauge your requirements before getting a card. For example, a card that offers a discount on flights and access to lounge facilities may be more suitable for a frequent flyer. The best credit cards to suit your needs may be evaluated before applying.
● Secure payment option: There are multiple layers of authentication while paying with a credit card. These include passwords, OTP, and validation checks to confirm the genuineness of the transaction. This makes it a secure mode of payment.
● Reward points program: With every purchase you make on a credit card, you earn reward points that allow you to access a host of other services/purchases. These include prepaid recharges, e-vouchers for shopping, booking of flights/trains, and the like.
Benefits of credit cards
Credit cards have become an indispensable part of our financial lives. Let's have a look at their advantages:
● Ease of carrying: Credit card eliminates the need for carrying cash. The payment procedure is also simpler, and one does not have to rummage for cash.
● Wide range of acceptance: Credit cards are globally accepted, making them a very convenient mode of payment.
● Smooth shopping experience: One of credit card benefits is that it provides an exceptionally smooth shopping experience. One does not have to worry about not being able to purchase due to a shortage of funds. It takes away the constraint of a monthly budget.
● Eliminates the worry of emergency funds: Having a credit card provides a sense of financial security. Any emergency like hospitalization and payment of bills can be easily managed with a credit card at hand without worrying about arranging funds.
● Promotional benefits: The discounts, rewards, and offers associated with credit cards are a big attraction. This is one of the credit card benefits that allow one to avail products/services at lesser rates, purchase using accrued rewards points and get cashback offers on purchases.
● Improvement of credit score: Credit score is a factor in determining a customer's eligibility to borrow funds. Timely payment of credit card dues helps maintain a good credit score and improve it even further.
● Interest-free credit: If the dues accrued on a credit card are paid on time, the credit is interest-free.
● Tracking of expenses: One can easily track expenses through the credit card bill, which helps streamline the monthly budgets and expenses.
● Extra advantages: Today, credit card benefits include certain factors like insurance cover for accidents and death. This is an added attraction.
A credit card is a convenient short-term lending tool available to a borrower. If used judiciously, with all the dues paid on time, one can enjoy various benefits from financial freedom to convenience. It is best to have a word with a financial institution/advisor to assess your finances and make a choice in line with the suggestions.