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Credit cards have revolutionized the spending behavior of customers. Credit cards are an essential part of households, businesses, and the global market. They are convenient and help in efficiently managing finances. Nowadays, credit cards offer tempting joining bonuses with cashback and reward systems. Almost every individual gets a credit card as soon as they enroll in college, some even before that. Starting to build a credit score at an early age is a sage idea. This creates a strong credit history and can later result in various additional perks and benefits.
At times it can have a negative effect. First-time credit card holders may find it challenging to manage their accounts and end up having some time of debt. Many times students take education loans and have that debt to pay. In such a scenario, getting a new credit card may seem unnecessary, and an additional spending tool that can become a liability. They might feel that the other credit card may add up to their debt, and instead of a credit card, they can use a debit card. But if you are responsible for paying for credit cards, getting a new card can be a smart financial move. There are some top credit cards in India that help in managing your credit with amazing offers. Here are some benefits of getting a credit card despite having some debts.
1. Build Credit History
Credit cards can help build credit scores if used responsibly. Credit cards are revolving credits, and paying them on time can boost your credit effectively. This can help in applying for a second loan if someone already has a student/education loan. A good credit score will be helpful throughout an individual’s life. Later on, they can use this to get credit cards that offer premium perks and benefits that can only be achieved with good credit history.
2. Perks and Benefits
Many credit card companies automatically offer perks like rental car insurance and trip cancellation insurance. Most of them also have cashback programs and a well-defined reward system. Moreover, all financial institutions with little variations usually offer these benefits. If a customer pays off the monthly bill on time and doesn’t get any debt, they can avail of these perks at a negligible cost. Cardholders get discounts while shopping, traveling, dining, etc. These benefits can lead to more savings that can be utilized in paying off the debt.
3. Track Spending
Credit cards can be a saving grace when any individual wishes to track the spending pattern; cash makes it impossible to keep track of things. Debit cards can also be used for the same, but they don’t offer additional benefits and perks. With the list of expenditures, an individual can realize unnecessary expenses and start to cut down on them.
4. Financial Responsibility
If an individual can make use of a credit card responsibly by regularly making payments every month, then they can plan aggressively to pay off the other debts. Owning a credit card and still not exceeding the limit is a step towards being financially responsible.
5. Safety
In case your card gets stolen, you don’t have to worry about fraudulent spending. Once the matter is reported to the credit card company, they take care of fraudulent transactions being made by the card. The damage caused by it doesn’t fall on you. In the case of a debit card, you end up losing a lot of money in such a scenario, and some automated transactions can get canceled due to insufficient funds.
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Considering all the perks of owning a credit card despite existing debts, an individual should also consider paying off the debt at the earliest. Sometimes people complain that it is far too easy to spend on things if you have a credit card. If not done carefully and responsibly, you can add up on your existing debts. This is true because credit cards have a higher interest rate. So, owning a credit card is fine, but the key is to use it responsibly rather than spending more than you can afford. Ultimately the decision, when to buy a credit card is on you. But here are a couple of suggestions that can help in managing things better.
- After getting your first credit card, develop a habit of paying for small purchases and essentials like gas, and groceries by the card. At the end of every month, try to pay it off ultimately.
- Unless you have fluctuations in income, opt for the autopay option. This will automatically deduct the minimum monthly payment of credit card from your bank account. While it’s best to pay off credit cards every month, having a backup is a wise idea in case you forget.
With these pointers in mind, you are on your way to becoming a financially responsible individual, whether you wait to pay off the debt before getting a credit card or not.
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