With every swipe through your credit card, you are rewarded. This reward can be in the form of a discount, cashback, reward points, etc. As you love being rewarded, you often tend to hunt for the rewards in every possible way. May it be whether you are buying a brand-new television set or an air conditioner, or just ordering a dish from a restaurant, you want a reward every time.
Here’s all you must know about how credit cards can reward you –
Emergencies sorted –
In the case of financial exigency, you do not need to depend on other methods or people. With the treasured plastic instrument by your side, there is nothing more you require to get over an emergency phase. Moreover, a credit card saves you from the embarrassment which you otherwise would have faced if you had borrowed the money from your friends or relatives.
Allows you to make cashless transactions–
With credit cards in your pocket, now you do not require to worry about carrying a lot of cash everywhere. Most of the shops, brands, grocery stores, etc., accept this plastic mate. In place of stepping out with a huge wallet, you must only carry this plastic friend of yours. It considerably lowers the chances of losing your liquid money, which you would require for another important purpose.
It allows you to form a positive credit record –
The next important benefit of availing of a credit card is that if you repay your full bills by the due date, then it would have a positive impact on your credit score. How can it help you out? Strong credit history makes it simpler for you to place the application for a loan in the future. As your credit history shows your potential to meet your dues on time, lenders may view you as a reliable and safe bet.
Note that the CIBIL score for a credit card or loan approval in the future is 750 and above. Anything below 750 may not fetch you with a credit option. All your repayment records of your credit card and loans are communicated to the credit rating agencies in India from the lender or credit card issuer, who uses them to fix your credit score.
Transferring balance –
Besides getting a low introductory rate of interest, many credit card institutions also allow you to simply transfer your balance to a low-rate card. Balance surfing allows you to make a decision as to when you need to close the unnecessary cards with high rates and move on to other economical options.
Reward points –
One of the most enjoyable parts about having a credit card is availing of reward points and benefits. Even though you are one of the few ones who do not like showing how much you like reward points, you have an idea that you secretly like it. There is nothing wrong or bad in looking for a credit card with reward points. There are a variety of reward points available, and these include additional discounts, frequent flier miles, etc.
Now that you are aware a little about credit cards let us bunk a few misconceptions about the revered rewards –
You can still make the most of your credit card rewards while avoiding the balance –
Completely wrong! In case you think that you can earn a lot of rewards while carrying an outstanding credit card balance, it is time to check your fact. Rewards may be the most attractive part of availing of a credit card. Well, it might be the second most enticing point. The first may be the feeling of finally purchasing your favorite thing.
Repaying just the minimum amount due every month is not a good enough deal. You ensure that your total bill is repaid on time. Yes, even though you make your minimum amount due payment, you get to earn reward points. However, you are charged comparatively more. This is because on making the minimum amount due payment, finance charges are levied on the remaining unpaid amount. Finance charges are as high as 52 percent p.a.
Those miles and points do not make a difference –
Just think about this again! All the frequent flier miles and various other benefits earned by you in the form of rewards on using the credit cards and bill payments on time make a huge difference. You must have come across the saying – bit by bit, break the rock. The same logic is applied here.
All the miles may look very trivial to be rewarding. However, if you continuously make all your credit card dues payment on time, they can pile up into a better outcome, i.e., higher rewards and discounts. Just try it on your own.
Availing of a credit card only to get those sign-up bonuses is a good decision –
Well, you for sure can apply for the credit card and just expect to avail of some attractive sign-up bonuses. Getting a plastic buddy only because you require availing of these introductory benefits makes no sense. No matter how tempting those may be, you require seeing a bigger picture.
Many of you get credit cards to exploit all its introductory benefits to later stop using them. Technically, this is addressed as credit card churning. While it may sound attractive, it may not be a good idea. It may impact your credit score over the long term. Thus, it is best to be careful than regret it later.
Encashing the reward points may impact your credit score –
It is one of the greatest misconceptions regarding reward points earned through credit cards. Surely, there are various factors that may impact your score, like poor payment history, massive debts, various inquiries ins a short time, poor CUR (credit utilization ratio), etc. However, encashing those points is not part of the list. Just ensure to make all the dues payments on your credit card on time, and you are all set.
Now that you are aware of most myths about credit cards, ensure not to fall for them.