Benefits of owning a credit card and how to maximize its potential

03 JANUARY, 2022

A credit card is largely used as a payment method in India. It is a fairly common phenomenon for most salaried and self-employed individuals to keep one or multiple credit cards for their everyday and special financing needs.

By each year, there is a sharp increase in the number of credit cards issued in India that reinstates the significance and ease of using it. If used sensibly, a credit card comes in handy in multiple situations of life where we find ourselves strapped on instant funds.

Sadly, many of us don’t know how to use a credit card optimally and end up landing in a pile of debt without even realizing it. So, what exactly makes credit card a valuable and profitable proposition, and how to maximize the potential of your best credit card in a coherent manner? Here are some benefits of owning a credit card that helps us build strong financial health over the years:

Credit Card Benefits

1. Credit Card is Comfortable to Carry & Use

It goes without mentioning that carrying cash is a cumbersome task. Every time you step out, you need to ensure you’ve adequate cash, and if not, you need to run to an ATM. You’re always conscious of your wallet and fear your money getting stolen. However, on the other hand, carrying a credit card is a convenient proposition. Being the digital boom, there are hardly any merchants where cards aren’t accepted. All you need is to slip in your credit card while leaving, and you’re sorted.

While making payments offline, you need to swipe the card, and you’re done. Unlike carrying cash, this is super convenient, where you need to ensure you have the necessary change to fund that purchase.

Using your best credit card, you don’t need to worry about buying any big-ticket item as you can repay it conveniently over a few installments.

2. Credit Card is Safe

Credit cards are a far safer proposition than cash. For instance, if your credit card gets stolen, you can immediately contact your bank and get it blocked instantly to avoid having any fraudulent activity on your credit card. Also, if you become a victim of identity theft, you can request your bank to reverse all the wrong purchases done on your credit card through purchase protection. Most banks offering credit cards also offer the purchase protection program to their borrowers to get the maximum bang for their buck in theft and fraud cases. Whereas, in cases of cash, you simply can’t undo anything. If your cash is stolen or if you lose it, there are highly unlikely chances of you getting it back ever.

3. Help You Earn Rewards & Deals

Over 90% of credit card borrowers in India use a credit card for shopping. If you’re unsure how to use a credit card for optimizing maximum rewards and offers, make sure you end up applying for a credit card that offers maximum deals at most retail stores, both offline and online. For every penny spent on your credit card, you’re entitled to reward points that you can redeem later for exciting deals and gifts. This is an excellent way of being rewarded while you shop.

4. Helps You Build Credit Score

If used responsibly and smartly, a credit card proves to be an efficient tool to build your credit score. Your credit score is a 3-digit number ranging between 300-900 that explains your creditworthiness to the lender. When you’ve a high credit score, above 750, it indicates you’re a responsible borrower. This is crucial to get you a personal loan or credit card approval when you apply for them in the future. It is computed by the credit bureaus in India based on:

• Your credit repayment history

• Credit utilization ratio (amount of credit available and amount of credit utilized, lenders suggest keeping this ratio under 30%)

• Secured and unsecured debt

Adopting the above sensible financial habits go a long way in improving and maintaining your credit score and help you appear to be a credible borrower to the lenders. A good credit score ensures a hassle-free and quick loan approval in the future at lower interest rates and other favourable terms.

How to Maximize Your Credit Card’s Optimal Potential?

While each credit card offers multiple benefits, it is up to the individual on how to use the credit card for optimal use. Using a credit card smartly helps you save money on each use and maximize its true potential:

• Choose the credit card wisely – Each credit card is designed for a specific use. You’ll find credit cards offering benefits on shopping, fuel, travel, and more. Assess your interest and inclination wisely before applying for a credit card to reap its maximum benefit.

• Pay dues in full, before time – While reading your credit card statement, don’t get misled by the minimum due amount. Ignore that and proceed to pay the full every month before the due date. This responsible financial habit boosts your credit score like nothing else does.

• Keep scouting your credit card statements – Keep a close eye on your credit card statements and scan them for any fraudulent transactions, identity theft issues, or wrongly debited expenses. This keeps your credit card history clean and ensures you can optimally utilize your credit card for maximum benefit.

While the market is filled with lenders offering the best credit cards, make sure you select the credit card and the bank wisely before applying for one. Choose the one that offers a host of options closely matching your needs.