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Weigh your income before taking a credit card

Ever since an individual starts receiving a regular income, it is quite common for him/her to be bombarded with multiple offers to own a credit card.

Published: 28th May 2018 01:47 AM  |   Last Updated: 28th May 2018 04:16 AM   |  A+A-

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Express News Service

NEW DELHI: Ever since an individual starts receiving a regular income, it is quite common for him/her to be bombarded with multiple offers to own a credit card. The offers are often presented in such a tempting way that even if you don’t need a credit card, you might end up owning one. Credit cards, though much lower in number than regular ATM-cum-debit cards, is quite popular among a particular section of people. It comes in different options such as Gold, Titanium, Platinum, Signature and a few more, and each has its own set of benefits.

Given the advantages that a credit card offers, besides being a status symbol, the demand for them has increased in recent times. However, they have their own drawbacks, and hence, it becomes important to analyse the pros and cons these cards come with, before opting for one.        

Advantages

Be it getting free movie tickets, cashbacks on purchases, instant discount on fine dining, reward points for flying extra mile, credit cards come with unending benefits. It also offers the flexibility to make payment at a future date. With most credit cards coming with an interest-free period, an individual can avail a period between 45-60 days, where they don’t need to pay any interest on the outstanding credit amount.

Many banks and NBFCs have also come with credit cards which by name is suited for a particular class of users. Take for example the co-branded cards such as Kotak PVR Gold Credit Card, wherein users can avail 24 free PVR movie tickets per year depending on the total amount spent during a month. Similarly, cards such as IndianOil CITI Platinum Credit Card provide benefits on purchase of fuel. Banks have also come up with credit cards built exclusively for frequent travellers.

Not only coupons and discounts, credit cards can also help people to avail easy, unsecured personal loans by maintaining a good credit score. Credit cards, in every sense, can perform tonnes of extra activities than a debit card.   

Costly affair

However, all the mentioned and unmentioned benefits of credit cards come with a cost. Cards that come with hefty rewards and benefits generally tend to have a joining and annual fees, which can range anywhere between Rs 500 and several thousands.

Credit cards also allow you to withdraw cash from ATMs, but again, bank charges interest on every cash withdrawal using a credit card. However, the costliest burden from credit cards comes when one has missed payment of the due amount on time. Usually, banks levy flat late payment charge, which can be a significant amount.  

Paying only the minimum payable amount — generally five per cent of the total dues — and leaving the remaining amount to be paid in future can put serious financial burden on individuals. Apart from these, credit cards come with over-limit charges, foreign transactions fee, among others.

The bottomline

Despite coming with several offers and benefits, one should always be careful before taking a credit card as it has the capacity to disturb financial goals simply by urging an individual to spend more. Hence, one should be careful before signing up for a credit card. The most important thing is to carefully analyse your financials and the kind of spending you can cover in your income without deferring bill payment for future dates. The other two important points are to evaluate whether you really need a credit card, and to choose the right one.

The spectrum of digital payment has broadened in recent times with many digital payment companies providing a handful of facilities for a credit card with a lower maintenance cost. For any co-branded card, make sure that your consumption for the particular brand is so high that the rewards earned will crosscheck your credit card charges.



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