A credit card serves as a financial instrument for borrowing and is considered as a convenient mode of making payments. With credit cards, you can buy goods and services without having to use cash or a debit card. Basically, credit cards provide a long-term credit facility to its users. It’s really convenient when it comes to using a credit card. You can use it to pay for your purchases for any in-store purchases you make. A credit card can also be used to pay for online purchases. Moreover, it’s easy to make repayments on credit cards. You can either choose to make complete repayments by the due date or you can also pay a minimum amount every month and gradually clear the entire outstanding amount. Although credit cards are really useful when it comes to managing your finances, many people still don’t really use it until the need arises. The common misconception regarding its use is that it will only benefit you if there is a need to carry a balance forward to the upcoming months.
Most people resort to using cash instead of credit cards to make payments as paying through credit cards would also involve interest charges on the amount used. However, all you need to do is be diligent about making repayments on time and you will not regret using one. Paying through credit cards also gives you rewards in different ways. Most people use credit cards only when they are in dire need of funds to pay for something or they want to take their balance from purchases into the next month. Cardholders often use a credit card when they don’t feel the need to pay off their balance any sooner. This is not a good reason for using a credit card as it will only place you under a massive debt in the long run. In this article we’ll explore how using a credit card can add to your advantage in ways other than simply carrying forward your balance.
Using Credit Cards Seem More Convenient an Option
With credit cards, you don’t have to worry about making purchases even when you don’t have the money for them. This instrument allows you to literally carry credit in your pocket at all times. For instance, it might be very important for you to make a certain big-ticket purchase. However, you might find yourself stuck in a situation involving a lack of funds and your salary day might seem little far away. In this scenario, having a credit card could turn out to be extremely beneficial as it will not only let you make the purchase without having any funds at the moment, but you can also choose to clear off the balance at a later time or pay the minimum amount by the due date. Interestingly, credit cards are accepted by most businesses today, be it small shops, large retailers, or service providers. Moreover, you don’t have to worry about the hassle of carrying cash at all times. You don't have to even bother going to the ATM anymore if you have a credit card. You have to simply swipe your card at the payment terminal and your transaction will be instantly processed.
You Can Make Convenient and Easy Repayments Using Credit Cards
When you pay through your credit cards, funds are not being drawn directly from your accounts right then. The retailers get the funds that have been processed during the transaction directly from the bank where you hold an account. You don't have to make the payment instantly, and thus, you can do without having funds in your account at the time of the transaction. You need to have funds in your account only by the due date so as to avoid any unnecessary charges, for say, late payment fee. You can make repayments through several modes. You can pay manually using your credit card and internet banking account or you can even pay by leaving standing instructions for an automatic bill payment.
Alternately, you can make repayments through cheque, apps, or mobile banking. Moreover, you don’t have to pay the entire amount on the due date, particularly in cases where you fall short of funds. You can choose to make minimum repayment on the due date, where you have to only pay a certain minimum amount instead of having to clear the entire outstanding sum. However, it’s generally advisable to clear as much as possible every statement month, if not the entire due amount. If you’re only making minimum payments every month, your debts will only keep piling up and there will be a time when you will be paying unnecessary and heavy interest charges on all your unpaid card balances.
Credit Card Usage Helps in Building Your Credit Profile
Your credit record is very important when it comes to determining your creditworthiness. It provides banks with a picture of your ability to pay back what you borrow. Based on your credit report, banks approve or disapprove your credit requests. Based on this report banks can not only decide whether to approve your credit card or loan applications, but they can also decide on the amount they could lend you. If your credit report is good, banks can approve your credit request for higher loan quantum. A bad or unsatisfactory credit score, on the other hand, can result in your future loan applications not being approved at all. Thus, it’s absolutely important to maintain a good credit report.
You can build or improve your credit report in several ways. One of the ways of building a good credit report would be to utilise a credit card in a responsible manner. The trick is to make certain payments through your credit card in a regular manner. This will build or improve your credit report over time. Banks can easily find out if you manage to make timely repayments on your credit card, based on which they can approve or disapprove your loan request. Thus, you should strive to make repayments on time. This will not only help you access loans more easily, but you might also get lower interest rates on the borrowed amounts. Additionally, by using credit cards in a responsible manner, you have more chances of having a higher loan quantum request approved.
Credit Cards Provide You With a Host of Rewards and Benefits
Cash payments or debit card payments may not involve any extra benefits or offers. You simply pay the amount directly from funds in your account or through cash when you make a purchase. Credit cards, on the other hand, come with several bonus advantages in the form of discounts, rewards, miles cashback, or cash rebates. Cash payments or debit card payments don’t usually provide you with any such benefits. The reward points or cashback earned is usually a nominal percentage of your transaction amount. It might not seem like a significant sum when you consider a single transaction, but they can add up to a pretty significant amount based on the transactions you make in a year. Some credit cards allow you to earn reward points on your transactions or you can earn reward points across selected categories. These points can be utilised at a later time to redeem other items or to offset purchases. Similarly, some credit cards provide you with cashback against on all transactions or across certain categories. You could also earn cash rebates on your transactions depending on which credit card you use. There are cards that provide discounts on your transaction amounts. Some credit cards are also offered in conjunction with frequent flyer miles programmes and they earn you miles on all your transactions or across certain categories. You can redeem these miles at partnering airlines or hotels to make your flight or hotel reservations.
Depending on the card, you might have to meet certain conditions before you can earn the cashback, discount, miles, reward points, or any other benefit. For example, a card might provide a certain percentage of cashback only when you spend a minimum amount or you might be able to earn reward points on a card only up to a certain cap. Some cards even provide you with sign-up bonuses or joining perks. These benefits are offered when your application for a credit card gets approved. These type of benefits are usually offered for a certain promotional period. Joining perks can also be in the form of a gift. Miles cards in Singapore often offer you with bonus miles when your card application requests get approved. Additionally, miles cards often combine other benefits such as insurance cover, airport transfers, and lounge access. Most of the credit cards in Singapore are characterised by an interest-free period. There will be no interest charges applicable on your due amount during this period. You have to pay off the entire outstanding sum by this date in order to avoid any interest charges. Thus, if you make repayments in a responsible and timely manner, there is no need to worry about paying any unneeded interest.
It’s Always Safer to Carry a Credit Card
One major disadvantage of carrying cash is the risk of it being lost or stolen. The same can be said about debit cards. If your debit card is stolen or lost, there is a potential risk of money being stolen directly from your bank account. On the other hand, there is no such risk involved when we talk about credit cards. Any fraudulent transaction or charge made through your credit card doesn’t put funds in your account at any risk. In this case, the funds are not being pulled directly from your account, rather it puts the issuing organisation or banks at risk. Moreover, you can challenge unauthorised transactions made through your card. Most banks in Singapore restrict your liability in such cases up to a certain nominal amount, provided you inform the bank right away after losing your card.
Some credit cards also take consumer protection into consideration and provide an additional set of benefits. These additional benefits include features such as purchase protection, price protection, and extended warranties. In case you purchase a product using your credit card and it turns out to be defective, features such as price protection or purchase protection will help you get refunded or obtain a replacement. Similarly, with extended warranties, you will be able to use your product for a longer hassle-free period. The lack of these features when you make cash or debit card payments make credit cards seem a more viable option. Travel and miles credit cards also provide insurance cover for car rentals, lost baggage, trip delays, and other travel inconveniences. Thus, you don’t have to worry anymore about losing your money in case of a mishap while you are travelling.
Credit, Debit, or Cash?
Debit cards or cash payments undoubtedly have their own set of advantages. In these type of payments you won’t be paying unnecessary charges in the form of interest or late payments fee. However, credit card payments have a whole lot of other benefits to offer, particularly when you are out of funds. Credit cards charge you interest on your purchases, however, it might still work out beneficial for you in the long run. Besides, you can enjoy several additional benefits when you pay through your credit cards. This could be in the form of cashback, discount, and rebates or you might be able to enjoy extended warranties on the purchases you make. Credit cards will help you find the required financing needed in case you have to make an urgent purchase. The key to reaping the advantages of a credit card is to use it in a responsible manner and to make timely repayments.