A credit card is a tool that can make or break your finances. If used wisely credit cards can do wonders help manage your finances and bring extra protection on purchases and maybe even get some cashback or rewards.
But not acting with discipline can get you trapped in a trap. Interest will mount and debts will rack up. Things can become dicey for you.
Now, you don’t need to wait and save for months to buy something expensive as you can pay for it right away and repay with time. Credit card has given us this liberty.
A 0% interest credit card will spread the cost over months and pay the debt in a series of payments.
As long as you repay the debt before the 0% interest deal you have got free credit and time to repay the debt.
Protection on Purchases
If you buy something above 25,000 and below 5,00,000 INR from your credit card then you are eligible for free purchase protection insurance. That means if your item is not delivered or damaged then you can directly ask for a claim from your credit card provider. This applies even if you use credit card to make only part payment.
0% interest cards can prove out to be savior for you. If you take a credit in the interest-free period and repay it in the same period then you get credit for free.
This can help in managing your cash flow. The usual tenure of 0% interest period is 2-3 years but if you want more then shift to a 0% interest balance transfer card after your 0% interest deal expires.
Make money when you spend money
Cashbacks and reward points are there to incentivize your spending. There are reward schemes that allot you points on every purchase and later on you can redeem these points into credit. Loyalty points, AirMiles card, Petrol cards and all such things will help you in some way.
Watch out for the trap
Don’t forget that the credit card is another form of borrowing. It’s just you can buy things now and pay for them later, but this has risk.
Inability to pay off the balance will result in piling up of interest. Lack of habit will get your credit out of control quickly if you only pay the minimum monthly amount.
Hence, it is advised to pay little more than the monthly minimum payment and think of the credit card as short term borrowing only. Try to fix an amount that is affordable, and pay it every month.
Interest is not the only type of fee that you pay. You also need to pay late fees on missing payments and also a penalty if you ever cross your credit limit. Make sure you can always keep track of your spending and pay your bill on time.
Control the urges of withdrawing cash on your credit card. It attracts more interest than normal credit and also it has 2% withdrawal charge. Also, cash withdrawals have no interest free period.
The right card
Choosing the wrong card can end up in a situation where you are paying more than you should. If you’re expecting heavy expenditures like shifting house, wedding, or travel, then consider a 0% purchase card.
If you need more time to clear your previous debt then zero per cent balances transfer card will help you. Use online tools to find the best credit card as per your needs. Remember, this shapes the way you will repay the debt.