Using a Credit Card
If you are diligent with your money, have a habit of keeping a track of your expenses or run into emergencies that calls for the usage of a credit card, then by all means you can prudently tap the advantages this piece of plastic has to offer! Credit cards do qualify as a good alternative method of making payments. Using credit cards offers several advantages over traditional methods of payments like making cash payments.
It is true that if you cannot manage credit cards responsibly, then its best that they are locked away in a safe place. The dangers of using a credit card recklessly far outweighs its advantages at any given circumstance.
However, on the other hand if you are diligent with your money, have a habit of keeping a track of your expenses or run into emergencies that calls for the usage of a credit card, then by all means you can prudently tap the advantages this piece of plastic has to offer!
Credit cards do qualify as a good alternative method of making payments. Using credit cards offers several advantages over traditional methods of payments like making cash payments.
- Credit cards are safer than cash: It is much safer carrying credit cards than carrying cash. It is a safer mode of payment, especially for large amounts, as one does not have to take the risk of theft that comes with holding large cash amounts. In case of theft too it is easier to minimize and recover from the loss. To give an example, Anita uses a credit card to pay for majority of her expenses. To her misfortune, her purse was stolen. It contained Rs. 1,000/- in cash and a credit card with a credit limit of Rs. 25,000/-. She immediately lodged a police compliant and also called her credit card company to report the theft. Her credit card company immediately froze the card and hence nobody could use it to make unauthorized purchases. It also cancelled her existing card and sent her a new one within a week and she could start using it immediately. The police did not have enough information to track down the thief so she knew she did not have a real chance of getting back the cash. She had to give up on the Rs.1, 000/-. So how much did she really lose because of the stolen purse? She could cut her losses because she used plastic money for most of her purchases and did not carry heavy cash with her. That is the advantage of using a card.
- Credit cards encourage better record keeping: Credit card statements provide a detailed list of all your expenses. It is just easier to keep a record and track expenses incurred using credit cards. Keeping track of cash expenses becomes difficult as one spends more and more in cash. It is not practical to write down each expense. For example, if in a day, Anita spends Rs. 40 on grocery, Rs. 150 on fuel, Rs. 100 in a restaurant and Rs. 50 on a gift – all in cash. She does not write down these expenses as individually each expense is petty and not worth the effort. She also thinks she will remember where she spent all her money (don’t we all do?). At the end of the month she has spent over Rs. 8000/- and is not able to trace back all her expenses. Anita is left wondering where what happened to all that money? Further it is difficult for her to track if she is going overboard with any of the expense, as she does not know how much she spent on each category of expenses. Do you think that this scene would have been different had she used her credit card for spending money?
- Credit cards can help you tide over liquidity crunch: In a particular month, Anita had to pay her utility bills but did not have the cash to pay them. Her credit card usage was well within its credit limit. She also knew that she would receive her next paycheck in 5 days. Anita used her credit card to make the payment on these outstanding bills that were due. She got her paycheck on time and she also paid her Credit Card Company as soon as she received her monthly statement i.e. within the grace period. Her credit card helped Anita to tide over her liquidity crunch. It is important to note that Anita just had a current liquidity problem. She had her paycheck coming in 5 days. She used her credit card to just help her cross over these 5 days without having to pay penalty on her bills. She also paid her credit card bill in full without paying any interest on it. It is important to use credit cards wisely and not treat them just as extra cash and use them to make purchases that are beyond your limits. Swipe your credit card only if you know that you will be able to make full payment on your credit card bill when it becomes due.
- Credit card offers several incentives: Using credit cards offer several incentives like reward programmes. Anita’s credit card offers her incentives like cash back, fuel points, frequent flyer points and frequent shopper points. She spent Rs.35, 000/- last year at shopper’s stop. She used her credit card for each of her purchase there as it gave her frequent shopper points. At the end of the year she had accumulated 350 points on her card. She could buy a pair of jeans using these points and did not have to spend an extra buck!
Good article with very useful tips. I too consider myself a wise user of credit cards and have benefited a lot from them – especially the reward points. I have redeemed points for several hotel stays abroad and a nice pair of Bose noise-cancelling headphones worth Rs.27000.
Another tip I would like to offer is to have two credit cards with billing cycles staggered by 15 days, and then use one card for half the month and the other card for the other half. For example, one of my cards has a billing cycle ending on the 10th of every month, and my other card cycle is upto the 25th. So I use card no. 1 between the 11th and 25th of every month, and card no. 2 for all expenses between the 25th and 10th of the next month. This way, I get an extra 15 days of free credit period in which I can pay my bill without any additional charges or interest.
nice idea of having two cards
Only one thing one should not do through credit card is " take cash from the bank". Here banks are charging 30 to 36 % interest on any cash withdrawal which is very very high.
It is right
This is very nice long awaited areticle. The only care to be taken by the users is to see their pocket balance and use the credit card. Never, let any waiter or staff of any hotel to carry your credit card even for swipping at the cash counter or adjouning premises. do not part with zerox copy of the credit card with any one and do not get tempted to pay only 10% of your bill. At last you will be lost in debt if you do so.
Using credit cards in all government-public transaction will help to reduce black money!!
why Credit card, I would rather use my debit card and stay in peace.
good one nerobrain
CC helps a lot when u dont have money and still u need to enjoy/buy a necessity, when ur confident enough that you would be getting money before ur due date.For me its the best as,
"I am using it for the past five years and continuos upgradation from the banks from my payment history"
This sounds great and the feeling when ur equiped with cc's in a family/group of friends is really admired and also ur image gets a lift in that case.
why credit card, it will raise the craze for purchasing even if there is no money in the account,and will lead to indebetedness. so debit cards are much safer.
Why 2 why not 3!, Having credit card is only beneficial if you know how much you can repay with your monthly income. otherwise your debt on credit will keep on increasing and by the time you realize it you will be having a huge debt under your credit card
I do not know who is this intelligent man who has written all green abt credit card. you must not forget the risk, you carry with the credit card:
1. You loose a card. By the time you realize the loss, intimate to police & credit card company, if the card is mis-utilized, you r gone. no credit card company listen to you… we do not have a law india unlike USA/UK where you loose the card and you have liberty of 24hrs to report the the loss and exempted from the mis-used card money
2. having a credit card, you get tempted to spend more
3. you cross the deadline of paying back the money or you just pay the minmum amount. you still get interest on you all unbilled amout untill you clear all your billed amount
4. Using credit card for cash widthdrwal is again another nightmare. you end up paying lot back to the credit card company
In my opinion, it's always a NO NO NO……to credit card
but you can leave without it these days. All online purchase requires credit card. so, use it intelligently…
Why one going for Credit as such, when one has got the deposit balance enough for expenses or his or her earning per month saved enough for the same. Those using credit card are the one spending whole of what they earn and have zero balance cash with them. This is a severe case that one has to safely part with a percentage suitable of one's earning for any emergency expenses, and in that way having a corpus and most of all to be in peace always. As is said USE DEBIT CARD and have lot and lot of peace, and the BANKS must henceforth encourage the usage of DEBIT-CARD and instant payment in cash and thus avoid unnecessary paper work and uncessary hanging on with what is spent in a month and for what,etc. And must of all there MUST BE a suitable incentive for all DEBIT-CARD USERS, who pay instantly and avoiding unncessary paper works, and piling up a lot.
Pl inform the advantages of accepting payments by credit cards from the sellers ie for easy accounting etc.
Yes, even I do the same. I always take benefit the way Jay is intelligently using the multiple credit cards considering their billing cycle. It really really benefits. And the other benefit you get out of paying the dues on time is the credit limit. If you are regularly doing the bill payment, then you can also call the credit card company for increasing the credit limit, but do it only if it really going to help. In other way having only the credit limit required is ok, having an extra credit limit would result in disaster like theft of the card and it is used with all the credit limit before you report the loss, then…??? huge huge loss to the owner of the card.