"Don't use credit cards." That's the word of wisdom that has been passed down for many years, particularly in families who consider plastic money a source of indebtedness and stress. And to be truthful, there is a certain degree of truth in it because many people are drowning in credit card debt. The trouble, however, is not in the plastic card.
A credit card, if used properly, is not a source of liability. A credit card can even prove to become an excellent financial instrument for an individual if it's used aptly.
The biggest benefit of credit cards has been and always remains something that very few credit card users calculate properly. For example, assume your billing date was January 15. You incur charges between December 15 and January 14. After that, you get another 15 to 20 days.
This also means that if you made a purchase on the 16th of December, it can fetch you nearly 50 days of free money. There are no interest rates involved.
Moreover, there are no penalties. Your money can be lying in a savings account or a fixed deposit or even a liquid fund.
It has nothing to do with putting off payments unwisely. It is about recognizing time and how it can work for you.
Another often underrated feature is the reward point. Most credit cards provide rewards for spending on things like flight tickets, gas, shopping, or dining. Consider the following, for example, where you make a payment of ₹10,000 for a flight ticket, and you receive 500 reward points.
These points aren't just random numbers. They can be used to get goods, air tickets, gift cards, or even to cut down your credit card bill. Over a period of time, this spending leads to actual savings. It's money that you were going to spend anyway, so you get something in return.
Contrary to popular thinking, credit cards actually help with financial discipline. The answer lies in control. The purpose of a credit card lies in efficiency and not inimpulsive purchasing.
You can opt to limit your expenditure every day and for each transaction using most of the credit cards. Once this limit is reached, the credit card will become ineffective. This serves as a pause button that makes you re-think before buying things that you do not need.
Applied in such a manner, a credit card is a boundary rather than a temptation.
Unfortunately, there is one mistake that will make having a credit card a nightmare, missing the payment date. Missed payments will incur high charges, high interest, and in the future, a bad credit history.
A substandard credit score is not just a problem for your credit card. This can come back to bite you in many years to come when you apply for a home, a car, or a credit limit increase, for that matter. That is why "reminders" and "auto-pay" are not up for debate.
Pay the full amount each month. Never the minimum payment. Never late.
Credit cards are neither good nor bad. What they do is amplify behavior. When misused, they will drain your finances. However, when used well, they provide time, benefits, and power. The choice is yours.
