Points by Card

India is predominantly a savings economy where people believe “cash is the king.” Here taking debt or a loan is both a social taboo and a burden. Compared to a developed economy where everything runs on credit, India runs on savings. We Indians believe in earning a rupee and saving 50 paisa from that rupee.

Credit cards have often been discarded/hated due to the risk of high penal interest rates and the risk of overspending. However, are credit cards really bad? The simple answer is “No,” but some amount of caution is still expected.

The Power of EMI?

EMIs are a really powerful tool. They help you buy aspirational things with the ability to pay for them over a period of time. A lot of time these EMIs don’t carry any interest rates.

However, I would advise caution to those people who go beyond their means and stack more EMIs than they can afford

Reward Points

Reward points are points which credit card companies give based on the usage. Typically it can range between 0.5-3% of the value of the spend, depending on the type of credit card you hold. Yes, some people might think these points are useless. But believe me (I will cover the power of points in a separate post) this is one of the most powerful reasons which attracts people towards it.

However, I would like to advise caution to those people who get lured by offers beyond their means to collect bonus points.

Chargeback

One of the most underutilized and lesser-known features of a credit card is “Chargeback.” Simply put, you can dispute a charge if the good and services you have bought have not been delivered to you, or canceled by you, or any such thing where you might be a victim of contractual delinquency or even frauds.

However, this should be used as a tool and as a last resort. There are charges and penalties for false claims.

International Spends

Traveling and seeing the world has become everyone’s night dream. However, in this dream, the nightmare is FOREX and international payments. A credit card is an effective tool to travel abroad worry free and if you use it wisely without a single penny of forex charge. Yes, you read it right. There is credit card from many banks (typically their higher tier card) which offers 1.5-2% charge on swipes on credit card and return you 2-3% as reward points.

However one should b mindful of the fact that when traveling abroad one cannot solely rely on a “single credit card.” There is always a possibility of card decline, nonavailability of POS, etc. Thus, it is always safer to carry multiple cards and some cash when traveling internationally.

Safer than cash

Credit Cards are inherently much safer than keeping cash in your wallet. If you lose your wallet, you can simply call the bank’s helpdesk to block your card and get a new card issued.

However, make sure not to keep the PIN and other confidential passwords in the same place as your card. This can be potentially dangerous as you might be handing out both the lock and key to any miscreant.

Complimentary Insurance

A lot of credit offer free insurance like travel insurance, accidental insurance, air accident cover, etc. These are added free benefits without any charge.

However, one should be mindful of the terms and conditions of the complimentary insurance. Some of them require you to use your card periodically to be eligible.

To conclude….

Yes, credit cards are a powerful tool, it can help you tide over cashflow mismatches and buy things which wanted in installments, save money while abroad, earn reward points to lower your purchase price, etc. However like all good things, a little restraint is always good and helpful, lest you go overboard.