I remember the time when it was not an easy thing in my country India to get loan and get something on credit. Rates of bank loan was too high for an ordinary man to afford it. Also, banks did not distribute loans easily. Therefore, people have no choice but to save money in savings accounts or fixed deposits with the bank. Those who were more aware used to invest on stocks as well. So, market could not progress much in such a traditional financial system.

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Things changed and Indian market was opened in 1990s when India adopted liberalization and globalization due to the conditions of the IMF and the World Bank. Since then we didn’t look behind. Now credit is easily available in the market. Banks call people through their call centers to offer bank loans and credit cards. I found credit card a very handy thing. When we don’t have much money, we can easily spend on shopping using our credit card and pay its bills in the next month when the bills are generated. There are lots of credit card companies in the market which are giving credit cards free of cost and also there is no annual fee on some cards. Usually the credit card holder gets grace period of 40 days to pay the bills. So, the card holder can defer his bill payment for a sufficient period. Apart from it, the user also gets reward points on spending. These reward points can be redeemed for bill payment as well as shopping. So, it not only saves some interest for us, but also earns some money for the users.

However, it also has a dark side. When a person uses hard cash for payment, she/he is more aware of her/his expenditure. She is afraid of spending her hard cash as depletion of money is fairly visible. So, when I have only 10000 INR in my pocket, I will hesitate to spend the whole amount. But, when I have a credit card, I’ll happily spend double of it, thinking that I’ll pay it next month. So, people are trapped in a vicious cycle of credit on account of plastic money. They cannot fathom the outcome of their spending easily. Also, credit cards push us to spend more than our paying capacity and it also encourages us to spend on things which are not necessary for us.

When we go for shopping with credit cards, we purchase those things without which we can easily work. But, we don’t care when we have plastic money. So, overspending is a normal occurrence in the modern time. This is the reason behind a growing number of credit card defaulters. According to a report credit card dues crossed INR200000 crore for the first time in history. So, it gives a glimpses of the future which may be worse than the present. Nonpayment of Credit card dues in time results in heavy penalty and exorbitant rate of interest on the payable amount. It also decreases chances of getting loans in future. So, it’s very bad for the user if he fails to pay credit card bills in time.

Credit cards are great help for us. We just need to restrict temptations. It can ruin one’s whole financial health when one fails to pay in time. That’s why it must be used with due prudence.

What do you think about it?

Thank you!