What are Advantages & Disadvantages of Credit Card?

Over the years, the number of Credit Card users in India has grown significantly. Whilst it has made the payment easy and helped the users gain valuable reward points, it also has a downside. Read on to know the pros and cons of having a Credit Card.

Today, many people in India use Credit Cards. The ease of use, easy repayment options, discounts, offers and other benefits of using Credit Card are unmatched by any other financial product. However, excessive use of Credit Cards can be a major problem, it can push into a financial debt and before you realise it, you could find yourself in a desperate situation. If you have no experience using a Credit Card or if you are planning to apply for one soon, it would help to know the Credit Card advantages and disadvantages.

Advantages

• One of the biggest advantages of a Credit Card is that it gives the Cardholder easy access to credit. By using the Card, you can purchase anything you want immediately and pay the amount later. The money used for the purchase does not come from your bank account; hence it does not affect your savings.

• If used well and if you are disciplined with your repayments, Credit Cards are an easy and efficient way to build your credit score and establish your creditworthiness. Your Credit Card usage and repayment history is one of the factors that banks and other lenders assess before approving or disapproving your loan applications.

• If you want to make a large purchase like an expensive phone or new furniture without touching your savings, you can use your Credit Card for the purchase and repay it in EMIs. Paying through EMIs is cheaper than opting for a Personal Loan as the interest rate for these loans can be as high as 20-25%.

• One of the key advantages of a Credit Card is that you can avail an Instant Loan on Credit Card- a fast and convenient financial solution during emergencies.

• Credit Cards come loaded with a wide range of benefits like reward points, cashbacks and air / travel miles. There are also many offers and discounts available on Credit Cards, which help you save a significant sum.

• One of the lesser known benefits of having a Credit Card is that when you purchase anything with your card, all your transactions are recorded and the details of the same are sent to you every month through the Credit Card statement. You can use the statement to keep track of your expenses and chalk out your budget accordingly.

• Credit Card Loan: Apply for a Credit Card loan which can help manage financial emergencies with ease. With ICICI Bank, you can enjoy faster approvals, and easy EMIs, without the need for collateral. The funds can be used for many purposes including travel, education, or home renovations.

• Most banks in India offer purchase protection when you sign up for their Credit Card. This helps you recover losses in the event of loss or theft of your Card.

Disadvantages

• Credit Cards have many fees and charges like late payment penalty, annual fees, processing fees, joining fees and renewal fees. Make sure that you do your research well and compare Credit Card fees and charges before you sign up.

• If you fail to pay your Credit Card dues within the due date, the debt is carried forward to the next month along with interest. The interest is accrued over a period and can add to up a high amount.

• Although there are many security measures for online transactions, there is always a risk of falling prey to a Credit Card fraud. There are many fraudsters who use advanced technologies to clone a Card and gain access to your information, which can then be used for unauthorised purchases. To avoid this, you must carefully check your monthly statement for any suspicious transactions and inform the authorities immediately about the same.

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