What are Advantages & Disadvantages of Credit Card?

OToday, many people in India use Credit Cards. The ease of use, convenient repayment options, discounts, offers and other benefits of using a Credit Card make it a preferred payment choice. However, excessive use of Credit Cards can become a major problem as it can push you into debt and you can find yourself in a difficult financial situation before you can realise it. Understanding the advantages and disadvantages of using a Credit Card is a wise move if you have no experience of using a Credit Card or if you are planning to apply for one soon. Read on to know the pros and cons of using a Credit Card.

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.

• All purchases made using the Card are recorded and the details are sent to you every month through the Credit Card statement. You can use this statement to keep track of your expenses and chalk out your budget accordingly.

• 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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