The Myth
Credit Cards have a kind of bad image associated with themselves especially in India. The primary reason behind this is that a lot of people have the wrong idea about how a credit card works. Maybe this is why there are only about 3 credit cards for every 100 people in India when compared to 32 cards in the USA. They have a preconceived notion that having a credit card means debt but this is such a misunderstood thing. Continue reading to know why credit card can be one of the best-earning streams for you(earnings as savings) and how can also prepare your credit score for the future.
What is a Credit Card
In simple terms, a credit card is an instrument that allows you to purchase stuff on credit. It’s a lot more than that and we’ll talk about it further.
The Misunderstood Fear of Interest?
A lot of people think that we have to pay high interest on the credit we use but this is not actually how it works. Almost all credit cards have a window until which if we pay the bill, we are not charged with interest. That means you just have to pay the bills on time like phone bills and it’s not a problem anymore. Even when payment is missed, usually about 2.5-3.5% per month interest is charged on the outstanding amount.
The Juicy Part
Now let’s come to the part we all wanna know about, how can be benefit from credit cards. Credit cards have a lot, I mean a lot of reward schemes associated with them. Depending on card provider and type, there are a lot of schemes available with specific use cases. For example, The Axis Ace Credit Card is a beginner-friendly card that gives unlimited 5% cashback on bill payments and recharges on Google Pay which one of the most used payment platforms in India. FIVE% is a lot considering the interest rates nowadays on savings accounts. Not just this, it gives 4% cashback on Swiggy, Ola, and Zomato, 2% cashback on all other spends with no upper limit. That is insane considering the amount we can save with day-to-day purchases. It also provides lounge access and other features such as restaurant partners offer up to 20% off and fuel surcharge waivers. Let us take an example of savings with the Axis Ace Credit card; Let us consider a middle-class Indian household with annual utility bills such as electricity, dth, phone, internet, etc of about 1 lakh per year. Now if we add another 1 lakh just for example basis the eligible online spends and about 50 thousand for fuels + restaurants. So we can calculate a rough estimation of the savings as 5000+~5000=10,000 INR savings per annum.
Similarly, there are hundreds of cards with a wide range of offers such as Flipkart Axis Card gives unlimited 5% cashback on Flipkart, Myntra, and 4% flat cashback on Uber, Swiggy, MakeMyTrip, PVR, GoIbibo, etc and other partner sites. The ICICI Amazon Pay card gives up to 5% cashback on Amazon and cashback on many other partner sites. There are other schemes also like life insurance etc. The list of such cards goes on forever and maybe I’ll make a blog about the top best credit cards you can have.
Credit Score
One more important thing that many people in India miss out on is that credit cards allow you to start and grow your credit score which is very crucial for better loan opportunities and other related stuff in the future. Just pay your bills on time and have a great credit score which can come in handy in the future.
Conclusion
As long as you pay the bills within the generous bill due days, credit cards can be very helpful for you to save precious bucks.