The professionals and cons of utilizing a bank card

NEW DELHI: A bank card is sort of a private mortgage, which makes for simple availability to customers/ households. Credit playing cards additionally provide ease of transaction at service provider retailers, letting one buy issues and pay later. However, they’re among the many most costly methods to borrow when it comes to curiosity price. Moreover, such comfort can induce poor monetary habits, comparable to over spending and borrowing. Also Read | The churn is on on the Kota manufacturing facility Today, we have a look at the professionals and cons of utilizing a bank card. “A bank card is a good technique for all of your month-to-month funds however will not be the most suitable choice for availing of emergency credit score,” said Anil Pinapala, Founder & CEO, Vivifi India. The Pros: > Boost to purchasing power, i.e. the borrower can buy for more than funds available which can be paid in future > Credit cards often offer reward points on spends. The more you use the more points you collect, which can be redeemed for a statement credit or merchandise, but the ratio of rewards points varies with the type of card and issuer of the card > Helps create a credit record > Credit card issuers typically have deals in association with retailers > Credit cards offer other value-added services such as complimentary airport lounge access, among others The Cons: > Leads to overspending and impulsive purchases > Carrying forward a balance on a credit card is a very expensive form of credit, with finance charges of 23-49% on the unpaid dues > Impacts your credit score negatively on missed payments > Credit card generally have annual fees which make it an additional expense > Delaying payments on credit cards attracts late fees Anuj Kacker, Co-Founder MoneyTap, said, “Credit cards are flexible and make shopping rewarding for customers if used mindfully. However, it can also be dangerous sometimes, especially if you fail to repay your bill on time. Or you only pay the minimum amount, which leads the unpaid amount to be transferred to the next month along with a huge rate of interest. Also, if you only make minimum payments while shopping impulsively, you will end up creating more debt for yourself, and your credit score might get affected by frequent defaults on payment. Apart from this, there is also a risk of credit card fraud and theft.” Subscribe to Mint Newsletters * Enter a legitimate electronic mail * Thank you for subscribing to our e-newsletter.