Credit Cards – Bane or Boon to customers in India

It is quite common to use Credit Cards by people in growing cities in India; banks will offer credit cards to its users by seeing their salary accounts. It doesn’t matter how much you are earning. If an individual is having a stable job in the reputed organisation they will offer Credit Card. *Younger generation considering credit cards as a social status. They will come to know the consequences only after few months, everything is happy when they pay EMI’s on time, when customers are not paying repayments on time, banks charge their users huge per cent of interest ranging from 28 -34% per month + bounce charge + whatever charges they feel customers want to pay. If this happens for two or three months, all of a sudden credit card that used look like a new girlfriend looks like a monster now.

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We are on the verge of month end; sure many people will be having their credit card EMI’s and repayments. Let’s discuss its advantages and disadvantages to different individuals today.

What is Credit Card?

A credit card is a chip based electronic card, provided by regulated financial institutes and banks to its customers. Users can spend money advance as per their credit limit and can repay in fixed duration every month. Banks will also provide an option to convert the used amount as EMI’s (Equated Monthly Installments) by adding some interest and fees to it.

Advantages

It is fact that individuals can use credit cards when they are really in emergencies. But many people spend credit cards for useless things and regret at month end. The biggest selling point for credits card is if customers are using them at POS in Malls, e-commerce websites, and petrol shops, they will get good discounts. Banks offer cash backs in terms of credits or points. We will list out the advantages of Credit Cards:

1. Purchase Protection: when customers are using e-commerce websites similar to eBay and aliexpress, they have to trust them only based on user reviews. If an agent is cheating or sending defective items, if we use the debit card we may end up losing our money, if customers are using credit cards they can ask for refunds from the banks and banks will handle disputes for its customers.
2. Cheaper for Short Term Loans: If we are in medical emergencies we can use credit cards to pay the bills and any products that are available is greater discount sale we can use credit cards. As we discussed they are cheaper only for a shorter period of time ~30-40 days repayment for almost major banks.
3. Cashbacks and Discounts: Long term users will get greater benefits (if they are using properly) such as loyalty points and minimum fee waiver. Sometimes regular users will get greater discounts when they are using cards in places where banks are partnered with.

Disadvantages

1. Hidden Costs: The biggest loophole in credit cards is that banks are encouraging people to spend money which is borrowed. Most credit cards will have a credit limit, once the user reaches their credit limit, banks start to collect fee n so many ways. While repaying customers will pay much more than they use in terms of fee. If customers are paying the partial amount in one month, banks will charge 18 -34 % Interest on pending amount.
2. Credit Card Fraud and improper budget Planning to users.