The presence of credit cards has made our lives much simpler. We can now buy things we do not have the money for and pay later. However, the usage of best credit cards is a huge responsibility. If not handled properly, it will lead to severe debts and may cause one to go bankrupt. This is the reason why many personal finance experts recommend that you should know how to use a credit card. However, if done responsibly, the usage of credit cards has more pros than the cons. This article talks about all that you must know about paying through a credit card.
- Grace period
Unlike a debit card payment, here the money remains in your bank account till you pay your credit card bill. That increases the time value of money and will contribute to your overall wealth accumulation. Now, if your money is in a high interest giving account, the money will give a decent interest in the interim period. This extra amount can then be deducted from the purchase you made and the product thereby becomes much cheaper for you.
The credit card of most banks gives the user a good amount of cashback. The idea here is that for every Rs 100 that you spend, the bank gives you back 3 or 4 rupees. The exact value varies from bank to bank. In the case of credit cards, the cashback does not depend on the merchant. This means that the cashback is credited to you irrespective of whether you spend the money in a petrol pump or a shopping mall. Over time, the cumulative cashback value adds up to a good amount.
Contrary to popular promulgations, a credit card is safer than a debit card. Let us consider a scenario, wherein both the cards are stolen. Now, for a credit card, you can inform your bank about the fraud and avoid paying for the same. In case of a debit card, the money is already deducted and it may take some time for the bank to reverse the transaction even after you prove the fraud. In the meanwhile, if there isn’t enough money in the bank, it may cause checks to bounce or scheduled online payments to be missed. This will cause you a lot of inconvenience.
- Wide acceptance
When in a foreign land, local merchants often refuse to accept international debit cards. That is true even when the card has the logo of a major bank in it. Across the globe, rental car companies, hotels, and other service providers prefer customers paying by credit card. The idea here is that in case of any damage to the car or hotel property, it is easier for businesses to charge their customers through credit cards. At such a point, if you insist on using a debit card, the service provider will make you keep a security deposit amount with them.
As you saw, the rewards are a bounty for payments made through credit cards. But the bottom line here is the financial discipline involved. If you are confident about that aspect, it will be wise to shift all your spending to your credit card. The debit card can be restricted to cash withdrawals, which in most cases, is minimal. The universal acceptance and better cash-back here will simplify payments for you.
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