With prudent use of credit card, you will not only be able to manage your financial needs better but also, smoothen out your finances in times of crisis.
Credit cards are bliss in times of a financial crisis. Along with that, they come with a lot of features, such as reward points based on usage and additional discounts. To suit every type of need, credit cards also come in different categories, which range from travel, entertainment, food and dining to shopping, etc, due to which people now own multiple credit cards. However, most are unable to manage their credit cards, and it often becomes the root cause of all their financial woes.
Most people make the mistake of thinking that money from the credit card is excess and spare money, which lands them into a financial mess. Nonetheless, with prudent use of credit cards, you will not only be able to manage your financial needs better but also smoothen out your finances in times of crisis.
Here are some ways in which credit cards can help you manage your finances, at the same time earning you reward points;
Manage your finances – Credit cards are spending instruments, and we just swipe it whenever needed. However, unlike cash, wherein you cannot always keep a track of all your spendings, with the credit card’s monthly statement detailing all your expenses, you can keep a track and analyse your spending patterns. Hence, if you need to understand and track your expenses, or plan on cutting down on unnecessary expenses, credit cards can be a very useful tool.
Credit history – Credit cards also help you build a credit history. This especially works well with the ‘new to credit borrowers’, who has never used a debt instrument like a bank loan before. These people don’t have any credit information available on them to prove their creditworthiness, and getting a loan without a credit history can be difficult, hence, people in this category face problem while opting for a loan.
Using a credit card helps one build one’s credit score over time. To do that one needs to repay their outstanding amount in the credit card before the due date and not default their payment. Experts say disciplined long-term use of credit card reflects a person’s creditworthiness and help them raise their credit score.
Rewards & cashback – Almost all credit cards nowadays offer rewards and cashback on the purchases made by the cardholder. The cashback, usually, range between 5 to 10 per cent of the amount spend. With efficient use of credit cards, cardholders can earn while they spend. These offers are generally not seen with debit cards. Note that, to get the most of cashback, you also need to make the repayments on time and in full every month.
Paying of utility bills – If you are one of those who forget the due date of utility bills like phone, electricity, gas water, etc. and then fail to make the payment on time, with the help of credit cards you can be consistent with the payment of your bills. Not paying bills on time means paying late fines every month, which can be heavy financial loss over time. Paying for your utility bills through credit cards also earns you reward points.
Additional benefits – Credit cards come loaded with benefits and features. Most people don’t know about it and, hence, don’t use the complementary features. Benefits such as accident insurance, baggage insurance, rewards points on various spends are some of the few. Credit cards also come with a credit-free period, which usually, ranges from 45-55 days depending on the bank issuing the credit card. If the cardholder pays off the due amount within this period, he/she will not be liable to pay any additional interest to the bank.