Maintaining healthy finances can help you sleep peacefully at night. On the other hand, financial indiscipline can lead an individual to penalties, charges, rising interest rates, and debts. Mounting debts can jeopardize a person’s finances at any stage of life. Therefore, it is crucial to look for ways to minimise debt and build strong finances.
If used in a disciplined manner, credit cards in India can be a useful tool to manage finances. And build a good credit score.
Let us see how credit cards can help manage and save money better.
Ways in which Credit Cards can help Manage Money
Building a healthy credit score:
Making expenses using a credit card is similar to taking a loan. All the credit card transactions of the cardholder are reported to the credit bureaus that decide the credit. Rating of the cardholder. The good thing about credit cards is that, unlike loans, credit card spending does not attract interest. If the bill amount is paid within the billing cycle. Moreover, if the cardholder pays back the amount in the credit card bill on time. It reflects positively on his paying habits and gives a boost to his credit score. A good credit score is a basis for getting further credits in the future.
Save money through the offers and benefits of the credit card:
Credit cards come with various offers and benefits. For cardholders. The benefits of credit cards may be in the form of reward points, cash-backs, discounts at stores. Lifestyle privileges, fuel surcharge waivers, etc. If the cardholder uses these benefits to the fullest, he can save a lot of money on his expenses. An individual should choose a card that offers more benefits than the annual maintenance fees credit card requirements.
Convert spending into EMIs:
Credit cards come with the facility of converting credit card debt or big-ticket expenses. Into monthly instalments. Also, An individual who is not sure if he can pay the debt on the credit card or who cannot finance. His high-price purchases can get the credit card amount converted into EMIs for easy repayment. Usually, credit card issuers allow a period of six to 60 months within which the cardholder can pay back. Also, The credit card loan according to their paying capacity.
Manage cash flows using the interest-free period:
The time between the date on which the cardholder does a credit card transaction and the due date for the repayment of the amount is the interest-free period on the credit card transaction. This period acts like zero-cost finance for the cardholder and can range between 15 and 55 days usually. A smart way to make big purchases on a credit card is by purchasing in the initial few days of the billing cycle. Also, It gives the cardholder ample time to pay back the credit card debt and helps him keep his spending interest-free.
Pre-approved loans against the credit card:
Credit card issuers offer cardholders loans against the credit card. They offer these pre-approved loans to cardholders having a good credit score and credit history. Cardholders can get instant disbursals on their credit card loans that are available against the credit limit on the card. Some care issuers may even offer instant credit card loans above the credit limit of the cardholder. Also, These loans do not require any documentation from the cardholder and are a way to deal with financial emergencies and fund shortages.
Spend in a disciplined manner:
Unlike cash, credit cards come with a monthly statement at the end of every billing cycle. The credit card statement has a record of all the expenditures done using the credit card. It helps the cardholder track all expenses and understand where one may have overspent. It also helps track unauthorised transactions on the card to save him from monetary fraud.
Paying the credit card bills on time develops a sense of financial responsibility in the cardholder. He can track his expenses and avoid overspending unnecessarily in the future. Also, Disciplined credit cardholders can build a strong credit history and a decent credit score using their credit cards which may help them get a loan for future investments like buying a house or a car.
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