Credit Cards: How The Plastic Can Help You Unlock Rewards, Security And More

Credit cards can help individuals massively in developing a healthy credit score. Making repayments on time helps establish you as a responsible user in front of the financial institutions

While credit cards can be a really useful tool to help build your credit score, develop financial security, and encourage a disciplined approach to money, they should be used with caution. ( Image Source :Getty )

Credit cards have become an integral tool of personal finance today. By offering rewards, discounts and several other perks, they have become increasingly popular amongst the public. However, as a financial tool, they are often misunderstood and feared. 

It is crucial to understand the benefits of using a credit card and how to utilise it to gain maximum advantage from it. While there are some issues to be wary of, the advantages of a credit card, if used correctly, easily outweigh these concerns. So let’s take a look at the several benefits of using these tools of finance. 

Credit Score

Credit cards can help individuals massively in developing a healthy credit score. Making repayments on time helps showcase your financial responsibility to the financial institutions. It not only helps you gain more trust from the institutions, but also assists in securing better loans with lower interest rates. A healthy credit score can prove a gamechanger in your financial journey in the long term.

Rewards

Credit cards often provide several attractive benefits and rewards. Every single purchase made on a credit card can become points, travel miles or even cashbacks for the user, depending on the kind of credit card they have. This helps in increasing your savings. Also, perks like travel miles help make air travel much more affordable. 

Convenience

Credit cards are the symbol of convenience and provide hassle free credit. Instead of having to worry about carrying cash or taking care of your cheque book, you can just carry your credit card and with a single swipe, make your desired purchase. This helps reduce the risk of getting robbed of your cash. 

Financial Planning

Credit card statements help provide a detailed insight into your expenses and spending habits. You can study these to understand how to better budget your finances and identify areas where you need to control spending. 

Emergency

By helping to cover medical costs, a credit card can become a lifesaver in an emergency. Emergencies don’t come announced, therefore, all you need to do is to carry a card to be better prepared to face such an unforeseen event. 

Insurance Perks

Certain credit cards also provide deals on insurance, extending insurance, warranty coverage, etc. Depending on the card issuer and insurance provider, these deals can vary and act as a helpful tool in utilising credit. Additionally, credit cards also allow you to opt for an Equated Monthly Installment (EMI) while making a big purchase. This helps protect your savings from diminishing due to a large expense and allows you time to take care of the expense without blowing through your bank balance. 

Financial Discipline

Using a credit card with caution helps develop a financial discipline in an individual. Keeping track of your spendings, paying back your dues in time, ensuring you have enough balance to handle your dues helps inculcate a culture of discipline in your financial journey. 

While credit cards can be a really useful tool to help build your credit score, develop financial security, and encourage a disciplined approach to money, they should be used with caution. If you treat your credit card as a debit card, it will help you keep a tab on your impulsive spending habits. The key point to keep in mind is to never miss paying your dues in time, as this can attract heavy penalties and cause you to fall in a debt trap.