Credit card is just like a beehive. If you know how to extract the honey from it correctly, you will benefit from it. If you don’t handle it carefully, it’s a death trap of debt.
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Let’s look at some pros and cons of Credit Card. The first four are the Pros of Credit Card compared to Debit card while only first 2 of Cons should be applicable to debit card compared to Cash.
Regarding which credit card should you opt for, ‘It depends’. If you do a lot of purchasing from amazon, Amazon ICICI card might be good for you; If you do from Flipkart, Flipkart Axis Bank might be better. If you are after the Airport lounge access, HDFC Infinia might be the best. We are just trying to sensitize you that there are different cards for different applications. So ‘which card should I get’ wont be able to get you a direct answer.
If you just wanted a card to increase your credit score, any card with zero annual fee would do.
Please note that most of the cards are difficult to get for the people who doesn’t have any credit history. So, you could try the below options.
Never ever fall for the debt trap. It is the single biggest problem with the credit cards. So use credit card only if you can pay the bill in full on or before the payment due date. You can do several tricks like immediately doing the payment to the credit card after the purchase of an item so that your final monthly bill will be zero, sync the billing cycle of the credit card with the salary date so that you will be able to pay the bill immediately after the receipt of the salary etc.
Credit Card is a double-edged sword. If you are prompt on payment and take a card which justifies your needs, then it’s better to have one. Either it can help you immensely or can destroy you based on how you treat it.
Comment
Let’s look at some pros and cons of Credit Card. The first four are the Pros of Credit Card compared to Debit card while only first 2 of Cons should be applicable to debit card compared to Cash.
Pros
- Credit: It gives you a revolving line of credit.
- Safety Net: Act as a backup for fund emergency till your emergency fund gets credited.
- Credit Score: Credit Card is the best tool to build up your credit score if you utilize it wisely. Don’t use more than 10% of limit to have a positive impact on the score. So better to accept the credit limit increase if the bank is offering.
- Risk: When there is a dispute on the transaction with your debit card/Net banking, the money on a debit card is frozen at your end. But with credit card, the money on hold is of Bank, not yours.
- Lounge Access: It’s always good to get food for 1-2Rs in otherwise expensive airports. Right?
- Life Insurance: Many are not aware that you get complimentary life insurance for many credit card. You just need to update the nominee details with the bank. Even though it cannot replace the need of a life insurance, why not utilize it since its free?
- Gives additional benefits like special discount offers, no cost EMI etc. time to time.
- Rewards: Most of the cards give rewards as points or cashbacks which could be redeemed against the outstanding or to get some products from their predefined catalogue.
- Tracking: Its quite easy to track the expense on the card and to provide evidence of expenses when needed (For e.g., reimbursement of the expenses you did on behalf of your employer)
Cons
- EMI Trap: You could easily get EMI offers which gives 0% interest loans for purchasing something. This makes us purchase something for which we don’t have money. And we carry forward that burden for months to come to pay off the EMI.
- Fees: Double check your need of a particular card before opting for that. If you don’t need a fancy one with all the bells and whistles, then don’t take it even if you are eligible since it might be coming with a hefty annual fee. Keep in mind that even if it’s free for this year, it might not be for the coming years.
- Credit Trap: If you don’t pay the full bill before due dates, you will be charges with heavy interest rate (even up to 35-40%). Banks get profit from those interest mainly. So be responsible and pay on time.
- Cash Withdrawals: Unless its specified, the cash withdrawals are charged with interest from day 1. You are better with taking personal loan than the interest rate of the card.
- Credit Score: There is going to be enormous impact on your credit score if you forget to pay your bills on time which could take months to recover.
How do I get a credit card? Which credit card should I go for?
Regarding which credit card should you opt for, ‘It depends’. If you do a lot of purchasing from amazon, Amazon ICICI card might be good for you; If you do from Flipkart, Flipkart Axis Bank might be better. If you are after the Airport lounge access, HDFC Infinia might be the best. We are just trying to sensitize you that there are different cards for different applications. So ‘which card should I get’ wont be able to get you a direct answer.
If you just wanted a card to increase your credit score, any card with zero annual fee would do.
Please note that most of the cards are difficult to get for the people who doesn’t have any credit history. So, you could try the below options.
- If you are salaried, try to get one against the salary account.
- If you are not salaried, try to get one against an FD.
Word of Caution
Never ever fall for the debt trap. It is the single biggest problem with the credit cards. So use credit card only if you can pay the bill in full on or before the payment due date. You can do several tricks like immediately doing the payment to the credit card after the purchase of an item so that your final monthly bill will be zero, sync the billing cycle of the credit card with the salary date so that you will be able to pay the bill immediately after the receipt of the salary etc.
Wrapping Up
Credit Card is a double-edged sword. If you are prompt on payment and take a card which justifies your needs, then it’s better to have one. Either it can help you immensely or can destroy you based on how you treat it.
