The concept of using credit cards gained popularity in the USA and other European countries a couple of decades ago. In India and other Asian countries, the credit card wasn’t that popular up until the early 2000s. There were many misconceptions that people had about credit cards. What they didn’t realize is that there are many benefits which credit cards have to offer. What is the purpose of using credit cards, when there are options of paying by means of cash? Well, one of the primary reasons why credit cards have gained popularity is because they allow you to carry out transactions, even when you don’t have liquid cash at your disposal. Yes, there are temptations of misusing the card, since your immediate financial balance is not getting affected. However, if used responsibly, credit cards can prove to be very useful and effective when it comes to ensuring the good financial health.
In the following section of this article, you will be offered a brief insight into some of the benefits that you can derive from using a credit card. These days, there are different types of cards available that come with a wide range of different types of offers and benefits. If used judicially, a credit card can certainly go a long way as far as your financial wellbeing is concerned.
Why Credit Cards Are Important – 7 Reasons
If you are wondering as to what kinds of benefits credit cards have to offer, here are a couple of points that will convince you:
- Credit History: If you are planning to borrow money from any financial institution and have applied for it, in that case, it is your credit score that is taken into consideration. Your credit card history plays a very important role when it comes to building a good credit score. Unlike debits cards, the use of credit cards is being reported to the related authorities which monitors the scores. If you have a record of paying your credit card balances on time, this would help you immensely to improve on your credit scores. The more you use your credit cards, the more you improve your credit history, which in turn will directly help to improve your credit scores.
- Cash Back: These days, this is one of the major benefits that are being offered by many credit cards. The concept of “cash back” was first introduced by Discover, and it gained tremendous popularity worldwide in a very short span of time. When you initiate any transaction with a credit card that has a cash back facility, you earn a certain amount of money in return. As far as the cash return is concerned, it can range between anything from 1 to 6 percent of the total transaction made. Over a period of time, these accumulated rewards can help you earn a considerable amount of bonus.
- Reward Programs: These days, most of the credit cards come with different types of reward programs. Reward programs include; however, are not limited to the followings:
- Reward programs can help you earn points which are determined by how much you have spent. You are awarded points which can help you in different types of rewards and gift cards
- There are flyer cards available which can be very useful for you if you are a frequent flyer. These cards have different types of lucrative bonuses to offer
- There are travel reward cards which help you win lots of points and consequently rewards for the travel which you have made over a period of time
- There are also reward points available for spending on groceries, restaurants and movie tickets.
- Tracks Spending: This is another way in which credit cards can prove to be quite useful. The credit card statement will give you a clear idea about your spending habits and will help you budget your expenses in a more efficient manner. Besides, you can get all the information pertaining to your purchases from the credit card companies.
- Protection against Frauds: As far as protection from frauds is concerned, credit cards are far more reliable than debit cards. For instance, if your credit card got stolen and is being used by someone, who has access to your pin and other details, you won’t be losing money. With the help of proper investigation, the amount that was transacted from your card will be credited back, as long as it proves to be genuine and authentic.
- Transfer of Balance: With the help of credit cards, it is possible to transfer the balance from one card to another. If you have any debts, like monthly installments or car loans, it is possible for you to transfer your balance to another card. This would help you to save money as it allows you in the process of transferring your debt to another card which has a lower rate of interest.
- Grace Periods: This is one of the primary benefits of using credit cards. They come with integrated grace-periods. When it comes to credit cards, usually, they offer loan on zero interest which can last for a month. Unlike debit cards, there is no need for you to have cash in the account in order to carry out a transaction. You are allowed a grace period in order to arrange for the payments. This grace period needs to be used wisely and judicially and make sure that you paid the maximum amount within the stipulated time period
Apart from these, there are tons of different benefits that credit cards have to offer. They are not only useful because they allow you to make purchases and carry out transactions without having to spend liquid cash, but also because credit cards play a very important role when it comes to improving the credit score. If you ensure that you paid your credit card dues on time, it will immensely help you to improve your credit card score.
Whether it is an online purchase or paying your restaurant bills, credit cards are globally accepted and you will never be out of resources to survive. Besides, the fact that they offer different types of reward points and cash back benefits, have made credit cards so popular. Looking to purchase something expensive? You have the option of converting it into EMIs with the help of your credit card. All that you need to make sure is that the bill is being paid within the due date. If you manage to maintain a good record, not only your credit score will improve, at the same time, your credit limit on the card will also be increased.