Six compelling reasons why you should use credit cards

Many a times, personal finance experts must have told you that using credit cards could land you in trouble and you may end up with a bad CIBIL score. If you are using debit card or cash only to make purchases because you think credit cards are villians disguised in plastic, you couldn’t be further away from the truth!

While it is true that reckless use of credit cards can lead to a debt trap and bring down your CIBIL score, however, using credit card responsibly has many benefits.

Take a look at the best reasons to use your credit card.

Universal acceptance
When you are travelling, it is much easier to use the credit card because of its universal acceptance as compared to debit card or even cash. Especially, if you are in a foreign country and trying to book a hotel or rent a car, you credit card will be your biggest aid. Needless to say in such situations, you debit card that you use domestically will be of no use and it is certainly not safe to move around in a foreign country with hard cash.

Get a grace period to repay your dues
The best thing about using a credit card is that you do not have to pay cash for any purchase instantly. If you make a habit of paying the entire amount you spend on your credit card within the specificied time frame, you can not only hold on to the cash in your savings account, you can access credit at your convenience at no extra cost. The good thing about a credit card is that apart from the billing cycle you are given a grace period- or the time you get to pay the outstanding balance without paying an extra fee. This grace period is a time frame of 15-20 days depending upon the card issuer. If you are able to use the billing cycle and the grace period judiciously, you will end up with a good CIBIL score as well.

Save up on air travel
A debit card is an extension of you savings account and often does not come loaded with as many benefits as a credit card. However, if you have a CIBIL score of 750 or above, you could opt for a credit card that offers a sign up bonus that can be pretty significant. For instance, if you are a frequent flyer, you can opt for a co-branded credit card with a particular airlines that you are a regular with. That gives you a sign up bonus of a good number of travel miles that will save you a lot of money on your air travel. With the right cards you may end up getting a free flight or two in a month, owing to your sign up bonus and the other points you garner while you travel. Other cards offer points that can be redeemed for gift cards or other freebies.

Good cash back schemes
If you an e-commerce enthusiast and make most of your purchases online, you can be rewarded majorly with the right kind of credit card. E-commerce portals have standing tie-ups with major banks, which offer anyting between 1-5% cash back on most purchases. You can thus save up quite substantially when you are shopping online.

Stock up on reward points
All credit cards offer reward points on each spend. These reward points are the best way to get more from your credit card. If you cannot think of ways of redeem these points immediately, there is no problem with that. You can keep stocking them up for some amazing rewards later such as hefty discounts on flight tickets or hotel bookings when you are on a vacation.

No shortage of personal funds in case of a fraud
While online banking is rampant these days, cases of phishing or online frauds are not uncommon. When you use a credit card, there are better chances of safety against a potential fraud as compared to a debit card. When a debit card is used illegitimately, the money is debited from your account immediately. Till such time you realise there has been a fraud, the money from your account has already gone and the process to notify your bank and do the needful for the investigation to take place takes a good amount of time.

As a result, it also takes a while for the money to be restored in your bank account. On the other hand, if your credit card falls into the wrong hands and there is a fraudulent transaction in your name, you get a notification and you inform the card issuer immediately.

But, reckless use of your credit card may land you not only in neck deep debt but with a poor CIBIL score that may not give you access to credit later. So use your credit card responsibly and enjoy the many benefits it has to offer!

(Image: Thinkstock)

(Rajiv Raj is the director and co-founder ofwww.creditvidya.com.)