Blog #26 : Reality Of Credit Cards - Finance With Atul


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Saturday, September 11, 2021

Blog #26 : Reality Of Credit Cards


Blog #26 : Reality of Credit Cards.

Credit Card is common now a day’s among us. People are using six, seven or eight credit cards at a time. Online shopping is booming now a day’s, there are two factors responsible for increase in online shopping – first one is pandemic situation and second one is due to increased competition among same sector and in this flow one major thing to note is – “DISCOUNT” and in greed of discounts people are using credit card frequently because different portals offer different type of discount on different type of online portals. Some people think that they can increase their credit card period by paying the bill of one credit card from other and so on. But the question arises here is – does credit have really such benefits or not? In this blog we will see what are the advantages and disadvantages of a credit card and how to use credit card smartly.


What is Credit Card & Why should take it?

By the definition Credit Card is categorized as plastic money as it can be used at any outlet where currency notes are valid for payment. You can shop, pay bill, online payment at e-commerce platforms, payment at petrol pump or any other financial transaction. Also the point to be considered is – one can use its credit card for withdrawal of money at ATM machines – but should we do it? Wewill see later. Next question is how one can get a credit card? It depends on salary of the individual and a CIBIL score is checked by the bank. (CIBIL score in simple language, bank will check your loan history and the time period you took to pay loans). CIBIL Score is a different topic I will cover it in other blog. 

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Credit Card



Let see advantages and disadvantages of credit card.

If we talk about its advantages then it is a safer to carry than cash means you don’t need to carry cash. Second advantage maintains the record of transaction i.e. it can help in case a conflict arises anytime and the major disadvantage is that bank charges higher interest and other charges if payment gets delayed. About 36% - 40% per annum bank charges. Even one can get personal loan at 18%. Other charge includes financial charge, late payment fees etc. other disadvantage of credit card is that in case of default, CIBIL score get badly affected and this will impact future. You cannot get credit card or loan easily. Further CIBIL cannot be improved easily.



Is Credit Card Good or Bad?

The simple answer is, it depends upon on you. How you would use credit card will decide whether it is good or bad. If you use credit card smartly then definitely you should take credit card because it will be convenient for you, but how to use it smartly. Whenever bank or company approaches you for credit card, they will told you about FREE CREDIT PERIOD means they will charge no amount for a certain time period for example 50 days or 20 days. Let understand it with help of an example. Say you purchased something on Jul 5, 2021 as bill date and the due date for the payment is 25 Jul 2021. In this case you get 20 days as credit period. But if don’t pay the amount after 20 days i.e. case of default, then interest will be charged right from the date of purchase. 



Should new people take credit card?

Answer is yes but use credit card as smartly. Spend as per your payment capacity and not as per your credit limit because the credit limit is too high. In my personal opinion don’t exceed 50% your income. Always pay your full amount due on time because it can affect your CIBIL score. Half payment can down your CIBIL score. And more important – don’t get into the trap of Minimum Amount Due. 



How do I get out of Credit Card debt?

First step to take is to delay purchase of non essential items and pay credit card due first.  Also if you have loan then pay credit card due first in this case also because the interest rates are too high for credit cards. If the scenario worsens then take another loan like personal loan, top loan etc. to pay credit card dues. These loans can provide you better interest rate for instance you can get top up loan at 10% or personal loan at 18%. You will get longer tenure to pay easily. 


Credit Card or Debt Card


Should I withdraw amount from ATM using Credit Card?

The answer is big no; only in case of emergency credit card should be used to take amount through ATM. This is because from the date of withdrawal high interest rate will be charged. In this case you would not get interest free period. That is why I will not suggest you to withdraw amount from ATM using Credit Card.


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