Why Credit Cards Are Better Than Cash Or Debit Cards, Why credit cards and not cash or debit card
Credit cards allow you to borrow a certain sum of money and pay back the amount in full or in installments, at a later stage. It is similar to the debit card, but the only difference is that a debit card allows you to withdraw cash or make POS or online payments till the cash limit in the bank, and a credit card allows you to make payments for the total credit limit allowed by the bank or financial institution.
For example, you have a bank account with a balance of 10,000 INR and a credit card with a credit limit of 50,000 INR. If you go shopping and purchase goods worth 20,000 INR, then you can pay 10,000 INR by debit card and the remaining 10,000 INR by credit card. You can also make the entire payment of 20,000 INR by credit card. The entire amount of credit card payment needs to be repaid by the end of the current or next billing cycle.
Why credit cards and not cash or debit card?
If you have a sufficient amount maintained in the bank then it is better to use a credit card for making online or offline payments.
For example, if you have a bank account with a balance of 1,00,000 INR and made a purchase of 10,000 INR, then you should use a credit card to pay the bill of 10,000 INR.
The more you use a credit card the more you will get rewards points. These reward points can be redeemed in the form of cash vouchers, flight discount vouchers, product purchases, and many more depending upon the company policy.
Once you make a payment using a credit card, immediately pay the amount back in the credit card wallet, and don’t wait for the billing cycle to end. As soon as you make the credit card payment, your credit score will improve. The improvement in your credit score can help you to increase your credit limit.
When you should not use a credit card?
Using a credit card is not advised if your bank balance is less or the next income or salary you will be getting after 30 to 45 days. This means if you are not able to repay the amount by the end of the next billing cycle then you have to pay interest rates of up to 15% (depending upon the bank or financial institution policy) on the unpaid amount.
How to avoid late payment?
To avoid late payment, you can set a reminder or use CRED app on your smartphone.