Credit cards – many more pros than cons

If you are one of those people who have been brainwashed into thinking that Credit cards are essentially tools of temptation to make you spend more than you need to, and have been therefore avoiding the same, then you must read this post. I have always found credit cards to be a very useful instrument and have used it for the last 25 years.

I think most readers are aware of how a credit card functions, so I will not be going into details of it. Essentially, it lets you buy some goods or services on short term credit. This credit comes with no interest as long as you pay the bill fully by the next billing cycle of the card. However, if you fail to pay the bill then the interest rate that you pay for the same credit is rather high. So, what are the common objections that most experts have about the usage of credit cards? Mainly the following:-

  • It promotes a culture of consumerism and makes you buy things that you cannot afford.
  • Psychologically it is easier to spend on credit card as the “pain of spending” associated, is much less than cash.
  • The interest rates are high if you do not settle your bill fully on time.
  • You can get into perpetual debt by using credit cards.
  • If you use credit cards for cash advances then it is very expensive.

Most of the above are specious arguments. The culture of consumerism is rampant in India today, credit cards only have an indirect linkage to it and is definitely not the cause. The psychology part has some merit but it is only for people who used to spend in cash earlier. Most people today have not spent in cash for large amounts. Paying the bill on time and not using the card for cash advances are basic rules of credit card usage and one should always follow these. Your getting into debt will be because of your attitude and temperament, not because of credit cards.

Like the internet and most other things in life the credit card can be used well or abused badly. The fault does not lie with the utility or instrument, it is really in the person who is using it. Having said that, let me try and outline some of the benefits of credit cards which make it such a delight to use:-

  • Most credit cards now come without a joining fee and also without annual fees. If not immediately, you will get these after a year or two. I have never paid any fees for my 6 credit cards in the last 15 years or so.
  • It saves you the hassle of carrying cash. I use the credit cards almost for all my transactions and so does my wife. If you have multiple cards and use them well, you can get 45 days free credit for most purchases.
  • Do not buy something just because you have a credit card, but do use the credit card after you have decided to buy something anyway. You will get great offers, especially on some of the department stores and online sales.
  • One of my credit cards gives me a 50 % discount on movie tickets, another lets me use the airline lounges for free and a third invites me to special cultural and food related events. Yes, I know this is because I have had the cards for a long time but anyone can get into that stage over time.
  • Contrary to popular notion, your record keeping of expenses will become much better if you use credit cards as all the expenses are tracked and you can get reports pretty much any time you want.
  • Worries on security are a valid concern but you can protect yourself against credit card fraud through insurance. Again with the introduction of chip cards and OTP mechanism the security levels have improved radically.
  • You can easily set up payment mandates for paying your credit card bills. You can also make all kinds of payments through the credit card. I pay all my insurance policies through my credit card.
  • Reward points from credit cards can be used for a variety of purposes. Every year we go for at least 4-6 family dinners on special occasions like birthdays and these are sometimes funded through the reward points.

If you are not having credit cards today, I strongly recommend you go for one. It will make your life a lot simpler and enable you to enjoy a lot of other associated benefits.

And, if you still feel that a credit card is not something you want to use, then let me know why you feel that way.

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9 thoughts on “Credit cards – many more pros than cons

  1. Sir, Except the reward points and the coupons you get with the credit cards, aren’t the rest of the valid for Debit cards as well ?
    If so and if someone is not interested in movie’s or the other sort of offers that it offers, would it still be justified to use credit cards ?
    Finally, Is it also true that wrt. to debit cards, credit cards offer more security / prevention of fraud ?

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    • Kartik, the most important thing about credit cards is really the credit. It gives you the freedom to spend and as long as you are sensible about it, is extremely useful. So yes, it is completely justified.
      With debit cards once the money is gone you cannot get it back, Frauds with credit cards can be disputed and rectified in most cases.

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  2. As one of the readers highlighted, most of the usefulness of credit cards can be achieved by using debit cards as well. It is beyond one’s common sense that someone like banks and other financial institutions would lend you money for your personal use “perpetually” (in 45 day cycles) without any return. As they are now paying interest on SB accounts, it is almost impossible to lend without any cost. It is just that we do not realize that there is a cost attached to it due to lack of transparency.

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    • Why are you worried about banks making money? They are in business and obviously need to make money. The point is the mechanism of earning is not from you but from the merchants. It is not true that debit cards offer the same features, most importantly they offer no credit!!

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  3. i absolutely agree with you sir.think before spending and credit card has its own share of benefits.i have started using it since 6 months and first thing it has done is alert my mind how much i have to pay back every time i use it.which keeps me in check of my limitations and also have my expenses checked every month.with debit card it seems like u have so much money to spend but with credit card u have so much money to pay.

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  4. I agree with you sir, the 45days credit period is a good relaxation to balance any one’s monthly financial issues. The only thing is we have to control ourself from unwanted spending.

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