7 Ways Credit Cards Can Help You Manage Your Finances Better
A credit card is an easy and convenient financial product that can be used for everyday purchases such as groceries, fuel and other similar goods and services. Operating on buy now, pay later principle, credit cards let consumers buy products on low-cost EMIs, something that works especially well for salaried individuals with fixed monthly salaries.
It can also be a useful resource for purchasing big-ticket items such as consumer durables, electronics and travel packages since the funds are not always immediately at your disposal and you get enough time to pay your dues back.
Beyond convenience, there are several other ways a credit card can help you manage your finances.
Some of these are listed below –
1. Gives You An Opportunity To Build Credit history
Whether you choose a credit card to earn air miles for your travel or go for the best credit card in India for dining, these cards can help you build a strong credit history. This is especially relevant to someone who is new to credit or who has never used a credit instrument such as a loan product (personal loan, home loan etc) before.
Such customers find it difficult to prove their creditworthiness due to lack of any credit information available which makes it difficult for them to avail a loan. Using a credit card helps them build their credit score over time.
However, to be able to that, one needs to repay the dues or outstanding amount on the credit card before the due date and not default their payment. If you learn to use your credit card in a disciplined manner, it will reflect your creditworthiness and help you raise your credit score.
2. Rewards & Cashback
The ability to earn cash backs and rewards for the purchases you make is one of the most obvious advantages of using a credit card. Each rewards program is built with its own system for managing, earning and redeeming rewards.
Almost all companies today offer credit cards with great deals in the form of rewards and cashback on the purchases made by the cardholder. For instance, the best cards for students offer cashback in the range of 5 to 10 per cent of the amount spent. So, if you use your credit cards efficiently, you can actually earn while you spend.
Many credit cards also offer sign-up bonuses to attract users to apply for and start using them. However, to get the most of the rewards and cashback offers, you need to make the repayments on time and in full every month.
3. Streamlines Your Cash Flow
Efficiently managing income and expenses in day-to-day life can get quite challenging. Right from delayed payments to unexpected home repair or health care bill, there are a number of things that can come up.
Your credit card can act as a great resource in such times and help you manage your personal finances better. For instance, when your income is delayed or a large bill arrives, you can easily rely on your credit card’s grace period to hold you over until you get back on track in terms of finances.
4. Utility Bill Payments & Keeping Records
Credit cards allow you to be consistent with the payment of all your utility bills including electricity, phone, had, water, and more. Further, the other great thing about credit cards is that they can help you keep a record of every transaction you make.
Even better, your credit card statements include every single detail including the date of the transaction, amount and the merchant name. So, in case you lose track of where your money is going, this is one way to keep tabs and find out in great detail.
5. Tracking Category Spending
There are several credit cards available today with robust reporting features built-in that allows you to see statistics on where your money is being spent.
For example, you can find out how much you have been spending on fuel in a particular month or if you spent more at dining/restaurants this month versus last. These tools help you manage your finances better and gives an idea if you need to adjust your budget or reduce your spending in specific areas.
In addition to this, credit cards come in very handy in case of medical exigencies. With a line of credit available at your disposal, you do not have to worry about arranging funds for medical bills in times of need.
Making your payments with a credit card makes it a lot easier to avoid losses from fraud.
Unlike a fraudulent debit card transaction when the money is missing from your account instantly, in case of such transactions on a credit card, you just need to notify your credit card company of the fraud and don’t necessarily pay for the transactions you didn’t make while the credit card company investigate and resolves the matter.
7. Accepted Worldwide
Most of the credit cards today are a commonly accepted mode of payment around the world. Irrespective of the place or country you travel to, with a credit card you can easily pay your bills in foreign countries.
Further, similar to a debit card, the credit card allows users to withdraw cash (with a small fee charged for the service) as and when required. This makes travelling around the world much more convenient for the cardholders as they need not worry about currency conversions.
Credit card benefits can vary by issuer and may even differs from credit card to credit card. But, if used responsibly, credit cards can be a valuable tool for handling your finances, earning rewards, travelling, building credit and managing unplanned expenses well.
Right from eliminating the need for carrying a large amount of cash around for shopping to converting large purchases to easy EMIs, credit cards can make the user’s life easy in multiple ways. Put simply, it can make managing your finances more convenient than any other payment method.
However, if you decide to open a line of credit, it is essential to consider how you plan to make the payments and how to use your purchasing power in a responsible manner.