Credit cards, despite being one of the most rewarding and convenient payment modes loaded with tons of features are often on receiving end of mixed, or in fact mostly unpleasant reviews by people across generations. Even the youngsters, popularly termed the millennials and Gen Z, tend to blindly believe the biased opinions or hearsays surrounding credit cards and debt traps, and hence refrain from letting credit cards enter their financial life.?
And that's not all, even existing credit card users often fail to maximize the benefits of credit cards, by either being unaware or hesitant towards utilizing the available features and facilities to the maximum extent.?
Whatever the case is, one thing that remains the same for both existing users and the uninitiated, is that credit cards would only turn out to be a bane in your financial life if you adopt sloppy usage and erratic repayment behaviour. Whereas, it can turn into a boon if you adopt disciplined repayment behaviour coupled with maximization of the available benefits.
So what exactly are the key benefits of credit cards? Why should you use them? Read on as we unfold the super benefits of credit cards no one should miss out on.
More often than not, many credit card users are either unaware or simply too lazy to pay attention to the interest-free period which their credit card offers. For the uninitiated, this period refers to the?duration?between the date of credit card transaction and the due date of payment, during which?interest is not charged on your credit card transactions as long as the?entire dues are?paid?timely. The duration varies across lenders and also depends on the date of your credit card transactions, but usually ranges anywhere between?18 days to 55?days.?
So how to make the most of this interest-free period? It's all about timing?your?major credit card spending at the beginning of your billing cycle, especially the big-ticket ones.?The earlier you make such transactions in your billing cycle, the longer time horizon you get in the form of an interest-free period, to repay the dues on or before the bill¡¯s due date.?
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Whenever we transact through credit cards, it's the?card issuer who pays?on our behalf and we later repay the amount on or before the due date as per the card¡¯s billing cycle. This working principle of credit cards makes them a?form of?credit, and thus, credit card transactions are treated equivalent to taking loans by the credit bureaus. That's why loan EMIs as well as credit card payment history is mentioned in your credit report and forms a part of your credit score computation.?
So, to build a credit history based on which your credit score would be calculated by bureaus, you need to avail some form of credit. Given that loans compulsorily involve interest costs, credit cards prove to be a better and cost-efficient way to build your credit score. The hefty finance charges associated with credit cards are only levied when you fail to repay the total outstanding dues on or before the due date. Otherwise, with tons of benefits like reward points, discounts, cash-backs, etc., credit cards turn out to be a great tool whose disciplined usage and timely repayments can gradually help you work your way towards building a strong credit score and/or improving it, which thereby makes you credit ready for future!
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Nowadays, credit card users can utilize EMI conversion in two ways. One, by converting your already done credit card transaction into EMIs. Two, by making the transaction/purchase in EMI itself. In the case of the former, generally, there is a threshold limit like ?2,000, ?5000, etc. (varying across lenders and cards)? transactions beyond which are eligible to be converted into EMIs. While this facility would relieve you from paying the lump sum amount by the next bill due date, it would involve some interest cost and sometimes even processing charges or other associated fees/charges levied by the credit card issuer.?
As far as the second category of EMI facility is concerned, it involves both ¡®no cost¡¯ EMIs as well as those involving interest cost. Many credit card issuers and merchants tie up to even offer additional discounts or cash-backs on availing this credit card EMI option, especially the no-cost one, for purchases/transactions, in their bid to lure the target consumers.?
However, the primary purpose of the EMI conversion facilities remains the same, i.e. to ease you from repayment of lumpsum amount (by offering repayment tenures of around 3 months-60 months), which you would otherwise have to repay if you had made the big-ticket purchase in one go without EMIs. On top of that, the interest cost involved in EMI facility, if any, is generally lower than the hefty finance charges you would have been burdened with in case you made that heavy purchase and were unable to repay the entire dues timely.?
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One of the relatively newer and little-known benefits of credit cards is the presence of pre-approved loans against credit cards. A possible alternative to personal loans, credit card loans involve similar nature of no restriction on end usage of loan proceeds and repayment tenures of mostly up to 5 years. A major plus point for credit card loans is that they usually involve near-instant disbursals, thus making them a handy loan option for credit card users in urgent need of money. So, how do credit card issuers offer such quick disbursals on these loans?
It's due to the pre-approved nature of credit card loans. Simply put, credit card issuers offer this pre-approved loan only to select existing credit card users?based on their spending patterns, credit profile and bill repayment history. This is what enables credit card issuers to not go through the documentation again for existing customers, hence facilitating these loans to involve one of the quickest processing disbursals amongst all credit facilities. As far as interest rates are concerned, they are generally a notch higher than personal loan rates and tend to vary across lenders and consumers, based on their card and credit profile.
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Another credit card feature, which in fact is amongst its prime benefits but often gets neglected or underutilized by credit card users, is the reward point redemption program.
Most credit cards offer reward points depending upon the category and quantum of transactions you do on your credit cards. And gradually, as these reward points keep getting accumulated, you get to redeem them against tons of benefits like gift vouchers, conversion into air miles for flights, redemption at select merchant outlets and/or online partners etc. Some card issuers even offer the facility to redeem reward points against the outstanding credit card bill!
So, all you need to do is pay attention to the reward redemption program pertaining to your card, and avail of the offered benefits once you have accumulated adequate reward points. Also, remember that reward points of most cards expire after about 2-3 years. Hence, keep a track of the expiry dates so that you do not end up missing out on the wide array of redemption benefits of the accumulated reward points.
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