A Complete Guide to Credit Card Advantages and Disadvantages

Thinking of applying for a credit card but not sure about it. First, we need to know what are credit cards? Credit cards are plastic money and have gained popularity among the youth. It comes with loaded exciting deals and offers one can enjoy. Like a coin has two sides, it also has advantages and disadvantages. Using a credit card can accrue benefits if you use it properly. It will help you in building your financial health. But on the other hand, if you do not use it cautiously it can lead you to a possible debt trap. Gone are the days when you had to wait in long queues to apply for a credit card in a bank, now you can apply for a credit card online.

Here is a complete guide to credit cards covering the advantages and disadvantages, and all you need to know about credit cards.

Advantages of Credit Card

Funds easily available: Credit Cards make funds available easily. You can make purchases even with credit cards when you do not have funds and repay the credit card bill later.

EMIs: On making big spends you can repay them by converting them into easy equated monthly installments. EMIs help you by taking off the burden of paying the full due amount in one go. EMIs are easy and affordable.

Build financial health: Credit Cards will never affect your financial health if it is used properly, instead it will help in building strong financial health which can benefit you in the future in many ways.

Improves credit score: On using credit cards sensibly and responsibly it will help in improving the credit score. No matter how bad your credit score was, the moment you start clearing your credit card dues the credit score will start increasing. Which is a good thing if you want to ever apply for premium credit cards. It’s a great way to increase the credit score faster.

Security: The credit cards assure you the transaction security. Without the OTP verification, the transaction will not be completed. The credit cards are secured with an EMV chip which protects you from fraudulent activities.

Balance Transfer: The biggest advantage you get with credit cards is the balance transfer. You can transfer your one credit card balance to another credit card and pay the balance with fewer interest rates. You can clear all your credit cards dues with one credit card by transferring the balance to one credit card.

Easy Loan: Having a credit card plays an important role in securing loans from the bank. As it reflects your credibility and the capacity to repay back the loan amount. This is a huge advantage you can get with credit cards.

Disadvantages of Credit Card

Minimum due balance: Never fall for the minimum due balance payment. Carrying forward the remaining amount will only attract high-interest charges, which will make it difficult for you to pay the balance amount in the next billing cycle.

Hidden fees and charges: If you do not go through the credit card’s most important terms and conditions, there are high chances that you will be forced to pay extra charges after using the credit card. This can lead you to a possible debt trap. Hidden charges like fuel surcharge, foreign currency mark-up fee, cash processing fee, etc.

Overuse: It is quite possible that you will overuse your credit card beyond the provided credit limit. This will attract over-limit charges and it can have a bad impact on your credit score also.

High-interest rate: Credit Cards attract high-interest charges when you default on credit card bill payments. Late bill payments can lead you to high debts as well as have a negative impact on your credit score. This can drastically affect the credibility of the credit cardholder.

Cash withdrawals: Withdrawing cash from ATMs using Credit Card attracts another charge fee. You cannot withdraw cash as many times as you can do with debit cards. With credit cards, you get a limited cash withdrawal, which is another disadvantage you have to deal with.

Bottom line

Should you take a credit card or not? After analyzing thoroughly the advantages and disadvantages, one can definitely vouch for a credit card. Best credit cards in India are offered by HDFC Bank, ICICI Bank, American Express, SBI Cards, etc. You should definitely look for credit cards by these issuers as they have a wide range of credit cards from entry-level credit cards to super-premium credit cards.

Everything can be dealt with if you can use a credit card responsibly. You can enjoy all the benefits of a credit card without having to worry about it. Whereas, overspending and not repaying the credit card bill amount can lead you to a debt trap.

You may also Read: How To Use Credit Card Wisely