A credit card can be a friendly tool in managing your finances. Credit cards can offer so many perks like purchase protection, rewards and cashback on expenditure, and even allow you to build a good credit history for future.
Undoubtedly, you have to be careful with its usage. If we overspend then we are going to get under the burden of expensive debt. But, if used with precautions, a credit card can be financially beneficial.
Here are the perks of opting for a credit card
1. Free purchase protection
You might not know this but almost every bank provides purchase protection insurance coveron purchases made by credit and debit cards. That means if you buy something with your credit or debit card and if it gets stolen or comes damaged then you can visit your bank to get a claim just like a retailer would have done.
The same protection is given if you pay a deposit on your credit card. The minimum and maximum amount to be eligible for claim depends on the bank and varies from 25,000 INR to 5,00,000 INR.
This applies even if you have made the card to make the payment partly, like if you paid for a 50,000 INR Television by giving 10,000 by cash and using card for the rest of the payment.
2.Take more time to pay for big purchases
You can use interest free credit cards to spread the cost of big purchases. These cards offer 0% interest deal for two or more years. You can use this time to pay off the debt without paying any interest. Just make all the calculations beforehand to make sure the debt gets cleared in the interest free period.
One should avoid missing any repayment and set up a direct debit for the same. If you are unable to clear the debt in the interest free period then take help of 0% balance transfer card.
3.Debt has become cheaper
There are balance transfer credit cards that are designed to help the people who are looking for cheaper ways to pay the debt. These cards usually offer a 0% interest deal for three years or more.
You have to remember that while these cards offer 0% interest they often have a high transfer fee. If you have confidence that you can clear the debt in shorter time, then go for a card which has low balance transfer fee.
4.Cashback and rewards for your spending
You can earn yourself some money when you shop with your rewards credit card. But remember, you will have to clear the balance wholly every month.
You get reward points on every transaction that can be redeemed on flights, high-street retailers and shopping at supermarket.
These cards have an annual fee though and you should factor it in when doing research.
5. Spend holidays at lesser costs
Are you planning an overseas trip? The standard credit card will burn a hole in your pocket due to the huge fees on foreign transactions.
To rescue your budget there are plenty of travel cards that are made for overseas travels only. Many offer good exchange rates, and charge no interest.
Avoid using the credit card for ATM transactions as interest will be charged on cash withdrawal.
6. Increase your credit score
If it is your first time or you don’t have a great credit history, then there are cards that can help you build your credit score by making timely payments.
You should know that these credit cards often have higher APRs and shorter interest free period with lower credit limits. You can only use them to build your credit score.