How I Learned to Stop Worrying and Love Credit Cards

“We do not believe credit cards are bad things. They are, however, very powerful and potentially
dangerous tools if you don’t know how to use them.” -Brian Lawrence.

Credit Cards are those financial instruments that are issued by financial institutions like Banks, Credit, Fintech companies, and other lenders. When you spend money with a credit card, it is from those companies that you are borrowing.

Any individual above the age of 18, who has a steady source of income, from salary or business or any other source and a Bank account is eligible to apply for a credit card. Some banks give credit cards against Fixed deposits also. Credit cards are issued based on your credit score/history.

Credit cards are a revolutionary invention in the sphere of spending as it is safer than carrying cash and also convenient. Yet there are some fears and misconceptions associated with credit cards that prevent many people from using them. They are the fear of overspending, the fear of falling into a debt trap, and the security issues with losing the card.

The truth is that wise, responsible and informed use of Credit Cards can help you manage your money cycle efficiently and also help you save a lot. Magnetic strip cards with PIN are safer than contactless cards that mitigate the risk of losing physical possession.

Let me tell you how to make the best use of Credit cards.

1. Make use of money in hand: By using a Credit card, you are actually borrowing time to repay. You
   get interest-free time, that’s the repayment cycle typically up to 45-55 days.  In the world of
   investments, time equals money. So the actual money in your account at present can be invested
   elsewhere.
2. Offers, Discounts, and redeem points: Credit cards offer a whole lot of cashback and other offers,
   discounts on products and services, and redeem points. Some cards give Life insurance coverage and
   free access to the Airport lounge. Remember to get a card that matches your requirements for
   which you actually make use of offers.
3. Build credit history with prompt repayments: Even if you do not take a loan from a financial
   institution, prompt repayment of Credit cards reflects in your credit history positively, helping you to
   get a Loan in a time of need.

Points of caution while using credit cards:

1. Remember to stay within your monthly budget and do not overspend with the temptation of the
   credit available.
2. Withdrawing cash by using a credit card can cost you a lot, as such withdrawals are charged high-interest rates. So use them only for swiping or for online purchases, Bill payments, and Ticket
   bookings.
3. Though Credit card companies allow you to pay the minimum bill due, it’s advisable to pay the full
   bill on the due date, as the overdue carries a huge compound interest that can accumulate.
4. If you take a credit card but do not use it, still you may have to pay the annual maintenance
   charges hence never take a card out of pressure or as a fancy and keep it idle.

She Writer Sandhya Naren, MBA, CAIIB is a Branch Manager of a Public Sector Bank, and also a Writer, Storyteller, and Women-Coach in Personal Finance. She’s the Co-founder of Manasa Learning Solutions, Life Skills Training Academy for women and children.