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3 Pros and Cons of Owning an Online Credit Card!

A credit card has emerged as an indispensable part of our lives. Yes, with its ease of usage, instant access to money, cashback and rewards, EMI facility, an online credit card is on the wish list of everyone these days.

However, not handling it carefully can lead even the best credit cards owners in a debt trap. Also, spending more or borrowing more than your repayment capacity can hurt your finances when the bill gets generated. In the same context, let’s provide some advantages and disadvantages of owning a credit card to present things clearly!

 

The Advantages First!

  • Instant Access to Credits 

Probably the biggest advantage of having a credit card is accessing easy money as per your needs. Credit cards function on a deferred basis of payment. It means that you can use a credit card now and pay for it later.

  • Helps you Build a Good Credit Score 

Using a credit card also lets you build and improve your credit score by leaps and bounds if you have been repaying consistently. It can help you avail a personal loan, home loan or other loans at a lower rate of interest with a speedy approval.

  • EMI Facility 

Suppose if you plan on making a large purchase and if you don’t want to pay now by sinking your savings, you can choose to spread your purchase into a tenor and save! Example – suppose if you made a purchase of Rs.12,000 and did not want to pay in one go, you can split the cost into an EMI of 6 months and pay only Rs.2,000 each month. Like this, your cost gets split, and it keeps your finances on track!

Now, the Disadvantages!

  • The Trap of Minimum Due Payment 

The biggest con of the online credit card industry is the offering of ‘minimum amount due’ when you go to make a payment for the outstanding. Many credit card owners think they need to pay the minimum amount, but the fact is that you need to pay at least the minimum to continue utilizing the available credits. Paying only the minimum due does not provide any respite as the interest is calculated on the full amount due which you must pay! Some people keep paying the minimum due and take years to complete a bill payment. As a result, they also end up paying more than what they borrowed!

  • Hidden Charges

Credit cards appear to be easy and issue-free by its usages, but also comes with a number of surcharges that could surge your overall expenses. Credit cards have some fees such as joining fees, processing and renewal charges along with late payment charges. Hence, if you miss a credit card payment, it could lead to a penalty, and if you are habitually late in clearing payments, your credit limit may get reduced. Having a reduced credit limit will negatively affect your Credit Score and leave your future loans in jeopardy.

  • Ease of Overuse 

Since credit cards have revolving credit, it may get tempting to make all purchases on your card, not letting you know how much you owe. It could lead to overspending and own more than what you can pay.

The Bottom Line

You just went through some of the major pros and cons of using or owning an online credit card. Credit cards are a great financial tool, and if you could manage them effectively, they will never haunt you financially.

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What do you think?

Written by aman khanna

3 Comments

  1. I don’t have a credit card but I DO have a debit/ credit card that I put money ON
    before I can spend any it’s the Blue bird card & it don’t cost me like a reg card
    so I like the way I have my blue bird cause that way I don’t go into debt more.

    I JUST wish my HUSBAND would get the hint of how to not put us in debt
    like he has done after I have tried SO MANY times to explain to him we can’t
    handle ANY MORE debt, but yet goes & buys a car 400 a month & with 200 ins.