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Credit Card Benefits - A Brief

So, on a quaint Sunday evening, while sipping from the proverbial tea cup, I sat to write the latest article for this new blog that I have started. Thought of a few things that I should write on, and the one thing that I think will resonate most for now with majority of the readers is the general benefits of using a credit card as a financial tool. I would like to mention it again, credit cards are a financial tool and not just a means of paying for something when you do not have money handy. This way of thinking is what will eventually lead you towards financial freedom as well, though I do not want to go towards that so early in our discussions.

I will try to keep most of the articles on this blog crisp and concise, in line with the ever decreasing attention span of our populace! So let's get on with it.


As discussed previously, most of the regular folks tend to keep a safe distance from credit cards. That is majorly because of a number of misconceptions around it and the general bad use of them by our previous generation! We use them only for the Amazon/Flipkart sales or buying things on EMIs since we cannot afford them right off the bat. And these are definitely not bad use cases for cards. But there is a bit more to cards than this.


Using credit cards consciously is more of a change in your thought process than simply swiping it away at every POS machine you see. I will list a couple of benefits that will help you think about these cards in a slightly different way.


Let's start with the most basic, but the most important one. Credit cards are basically credit lines provided to you by the banks or any other financial institution. Essentially they are lending you an unsecured loan for a period of 40-50 days, wherein they do not levy any interest if you pay back on time! Now go back and read the previous line again, maybe twice. Does it light a bulb? Let me spill it out clearly. Every purchase you make on your credit card, is in a way, a short term fixed deposit that you are doing by not spending your liquid cash which is sitting in your bank account. How? Well, since you have made purchases on a credit card, the cash which you would’ve otherwise used to buy the same product, is now sitting in your account earning an interest of about 3-7.5% per annum(based on the bank and the amount you hold)!

 

We haggle at the vegetable vendor for every rupee while buying weekly veggies while paying in cash. But have you ever thought about buying vegetables on credit? There is an amazing saying in Hindi - “boond boond se sagar banta hai” , which translates to the ocean is formed by the accumulation of drops of water! In English, we have something similar - “A journey of a thousand miles starts with the first step”. Simple yet profound, no?


Next we have safety, most of the credit cards have a safety net for the customers, which is the Zero Liability Protection. Now this value depends on card to card, but in short it means that till a certain value, if a fraud does happen on your card and you notify the card issuer within the specified period, you are not liable to pay anything! This feature is also available with Debit cards and Savings accounts; but with the credit cards, since the money actually belongs to the issuer and not you, there is some peace of mind. You can still go along with your daily life normally since your savings account has not taken a hit. Also credit card dispute resolutions tend to be slightly faster.


Next up, the intangible benefits, I am grouping them together since not a lot of folks manage to utilize them and it’s not for everyone anyway. One of the biggest pluses is the access to Airport lounges, both domestic and international. Personally, this is one of my favorite features of a credit card. The ability to cut back from the chaos of the airport and chill with a drink in the lounge before a flight is something I cannot explain! Especially for someone like me who is not very comfortable sitting in a single position for a longtime. 


Being able to relax this way before flights has made my air journeys easier now. Some cards now also come with Railways lounge and Airport Spa benefits! Apart from this, a lot of cards also give discounts on eating out or Buy1Get1 while buying movie tickets (BookMyShow/PayTM movies, etc.), on fuel purchases, zero forex charges for international transactions(usually 3.5% for debit cards). 


There are also cards that give you loyalty points for specific brands which can be utilized for buying different things such as hotel stay vouchers, flight tickets or upgrades, etc. Such cards are mostly preferred by people who love to travel, since they can rake up points by spending during their daily life and then use them to satiate their wanderlust later! 


I have myself used such points for a recent Singapore trip. It was a 5 day trip for two(myself and my wife), and the total cost including flights, stay, sightseeing and shopping was about INR 1 lac! The flight and stay(at a prime location) was completely covered by my credit card points! How did we manage to achieve it? I will be covering it in the future article, but for now, it's important for you to know that it’s doable! 


Just think about it, you will anyway go on with your daily, monthly and yearly spends. With inflation rate being what it is, you will end up spending a lot more with each passing day, so why not spend smartly? When everything around us has been turning smart, why do we, as the consumer, cannot be smart spenders? 


Finally, you should be aware that a credit card is also a sort of a fallback, in case you are in an emergency situation or when you are cash strapped but a payment cannot wait. With the advent of Digital India, most of the transactions can be done via cards, be it medical, rents, education, insurance or even taxes! Why would you want to use up the cash in the bank when you can earn a tiny bit of interest from it every month while the credit line works for you?


You would’ve seen I haven’t listed no cost EMI as a benefit here. I have my reasons for it and we will definitely dwell into them in upcoming days. Again, if you have any specific topic or card that you would want me to cover in detail, please leave a comment!

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