Seeking a loan from a friend, a relative or a bank is always a bad idea. One should rather strangle his wants than throw oneself into the abyss of debt. All the finance pundits warn us against using credit cards, and they’re right as most of us abuse them only to end up in debt.
However, if a loan comes with rewards and you know how to spend responsibly, then you’re actually much better off paying with a credit card, rather than with cash or a debit card. And the ease and suppleness that comes with carrying a credit card instead of cash is undisputable.
Here are five reasons why you should own a credit card.
Depending on your lifestyle and needs, you can choose among various credit cards. If your job involves travelling, then you might opt for the cards that earn you bonus rewards for every mile you travel, ultimately winning a free return ticket to your favourite destination. Some credit cards get you reward points for every rupee you spend on shopping, the reward points double on international spending.
You earn one point per specified amount of rupees spent. For example, I earn one point per 50 rupees, and each point equals 40 paisas, hence I earn eight rupees for every thousand I spend. After you reach a certain point of threshold, you can redeem your points for shopping at some stores. A few cards come with two to five per cent cash-back on shopping and fuel, so if fuel prices increase, you end up paying five per cent less regardless.
Credit cards get you a higher percentage off on a number of products at a number of outlets, such as restaurants, various retail stores and shopping malls. Sometimes there are promotional offers too. So if you eat out or spend a substantial amount of your time at cafés, or make purchases from one particular store, then a credit card can be your perfect companion. Sometimes promotional discounts go to the extent of 50 per cent off. Online stores also offer various discounts against different credit cards.
Living in Pakistan, I don’t like to carry a lot of cash with me, and I bet nobody else does either. It’s gone and dusted if you lose it or if somebody steals it. So it’s far better to keep credit cards which are convenient and safe. Even if stolen, you can always get your card cancelled at the convenience of a call.
They are also convenient to use to buy things online, or to buy expensive items. Besides earning miles while you travel, credit card also gives you flexibility of not carrying enough foreign currency, which again is prone to the risk of losing it. Though credit cards charge a fee on foreign transactions, that fee is, however, counterbalanced by double rewards.
4. Grace period + Zero mark-ups
One great ease of using credit cards is the period of days between buying something and the day of payment. The grace period varies from 45 to 52 days. However, the grace period does not count for every transaction you make, but for all the transactions made within a month. There is always a due date by which the payment is to be made. For example, if the due date is the 22nd of every month, then the bill will carry all the transactions made between the first and 30th of the last month.
Therefore, you will have a grace period of 52 days for the first transaction, while only 22 days for the last one. Another most important feature of credit cards is that if you pay your bill on time, you are not charged anything extra. This way you end up rich by numerous points and discounts, while paying nothing in extra. However, if you do not pay the entire bill by the decided due date, the bank will start charging you a mark-up of 38-43 per cent from the date of purchase.
With the introduction of enhanced security features, it has become very difficult for anyone to take advantage of stolen or lost credit cards. You can help yourselves by following the simple rules to not let your credit cards slip away into the hands of potential fraudsters. You can also save yourself from a bigger disaster by paying a minimum premium to have your card insured.
With the fraudulent use of your debit card, you lose all your money at once. By contrast, when your credit card is stolen and misused, you lose nothing. All you do is immediately notify your bank of the fraud and don’t pay for the transactions made during the period, while the bank investigates and resolves the matter.
When you know you have some (plastic) money in your pocket, the temptation to spend might just overcome your ability to keep your expenditures under control. The key is to not to fall for the debt trap and keep reaping rewards, discounts and cash-backs on your credit card.