As with anything in life, even your credit card carries its own set of advantages and disadvantages. We have tried to bring out the brighter as well as the darker side of owning a credit card to help you manage your finances better. Let’s start off with focusing on the brighter side.

1. Advantages and disadvantages
of credit card

2. As with anything in life, even your credit card carries its own set of advantages and disadvantages. We have
tried to bring out the brighter as well as the darker side of owning a credit card to help you manage your
finances better. Let’s start off with focusing on the brighter side.
1. Chance to earn extra return on your cash balance
2. Save the hassle of carrying around cash
3. Borrow for Free
4. Awesome perks in your pocket
5. Online purchases
6. Easy EMIs
7. Insurance
8. Consolidated Bill Payments
9. Budgeting
10. Repair your credit history & Build a positive credit score (CIBIL) easily

3. Chance to earn extra return on your cash balance
With credit cards, you have an advantage of possessing higher average monthly balance in your bank
account, leading to earning extra interest income for anywhere between 30 to 45 days. Let’s say that your
billing cycle runs from 12th to 11th of every month. Then, the expenses from the current month would be
billed on 11th of next month. And, if your payment due date is on 30th, then you still have two more weeks
to make the payment. So on an average, you end up earning 45 days extra interest every period.
Save the hassle of carrying around cash
With credit cards around, you don’t need to look carry cash around for your weekend shopping or
wedding purchases. There is always a chance that might get pick-pocketed with a less than 1% chance of
getting hold of the pick-pocketer. With credit cards, you can immediately call up the hotline and block the
card. Also, in cases of prompt reporting of a lost or stolen card, you’re protected against any unauthorized
usage. Apart from credit cards there are also e-wallets & online wal lets that allow for quick payments. For
example Citibank has tied up with Mastercard to launch CitiMasterpass to allow for one click transactions.
There are also wallets like Momoe, PayTM, etc which help in this.

4. Borrow for Free
If you need to buy something urgently but your cash is expected to come over after a week or two, you
can easily swipe your credit card to go ahead with the purchase, without any extra cost. It saves you the
hassle of going for a bank loan, which again would take at least a day or two to process even in this age of
insta-loans. Some credit cards also offer 0% loan with the interest part as a cash back as long as you
payback the amount within the stipulated period.
Awesome perks in your pocket
From frequent flyer miles and accelerated rewards to big discounts at restaurants, shopping outlets &
ecommerce sites; credit cards pamper customers to the hilt. The catch often is to find the right card that
caters to your purpose and at the same time offers the perfect mix of benefits. For example, if you are a
frequent business traveler or you love taking vacations then the Citibank Premier Miles Credit Card would
be the right choice as it is one of the best travel credit cards in India. It offers a wide array of rewards and
privileges such as 10 miles for every Rs. 100 spent on airlines & preferred merchant outlets, upto 20%
discount at over 2000 restaurants across the country and 4 miles for every other Rs. 100 spend. The miles
offered are never-expiring and airline agnostic so doesn’t matter where your plan your next vacation, you
can always use those miles.

5. Online purchases
With the boom of ecommerce, credit cards have become more important. Credit cards are easier to pay for
your online purchases with the benefit of easy EMIs and Extra Discounts at your bank’s partner portals. Many
credit cards and online wallets (linked with your credit card) also offer cashbacks on your online spends, thus
making your shopping go lighter on your pocket.
Easy EMIs
Be it an offline retail or an online purchase, credit cards allow you to easily convert your purchases into easy
monthly installments with the click of a mouse. Especially for large value transactions EMIs can help take the
burden off from your monthly expenses. These EMIs come at a flexible interest rate. Now compare that to the
paperwork involved in getting a personal loans.

6. Insurance
Your credit card can make your life’s emergencies easy on you, as long as you play within the rules. The best
cards in the industry offer complimentary insurance. For example, the Citibank Premier Miles Card, which
many of the team members at Finance Coach use; offers an air accident insurance of Rs. 1 crore. Similarly,
many credit cards of leading banks in India offer complimentary medical insurance or travel insurance cover.
Consolidated Bill Payments
You can set up all your bill payments into an auto-pilot mode, be it mobile, electricity or DTH bills and stop
worrying about late or missed payments. Moreover, it also consolidates and brings together all your billing
requirements in one place. Banks also reward you with points, miles & cashback for activating these bill
payments helping you further save on your expenses.
Budgeting
If you use your credit card regularly for your monthly expenses, then your credit card statement is an itemized
summary of all your monthly expenditures. Some cards also provide a year-end summary. You can keep track
of all historic expenditures from your card and list out the expenses that could have been avoided & directed
towards your investment or savings. It also makes it easier for filing your income tax returns at the end of the
year.

7. Repair your credit history & Build a positive credit score (CIBIL) easily
If you are having a poor credit score as per CIBIL (click here to learn more about the CIBIL score & credit
worthiness), you can leverage your credit card to demonstrate your ability to manage credit and repay the
credit regularly. You can boost your credit score immensely over 1-2 year with effective usage of your card.
Some key tips in that direction would be as follows:
•Limit your credit transactions to below 60% of the available credit limit
•Pay the due amount completely rather than a minimum due payment. Apart from the impact on your credit
score, you also pay an interest on the outstanding amount
•Analyze your requirements and accordingly, limit the number to credit cards you own to 4 and avail the
benefits. Anything above that is not required.
•On its website, CIBIL points out that 79% of the loans in India are approved for individuals with a score greater
than 750 so using a credit card can be essential in improving this score and the prospect of taking up loans in
the future.

8. Minor Disadvantages of having a Credit Card that need to be managed
Owning a credit card can never be disadvantageous but improper usage definitely can have its repercussions.
So, let’s take a look at some of the disadvantages of improper credit card usage that can help you develop a
judicious credit card usage habit.
1. Impulse credit card purchases
2. Miss the payment cycle & you can end up paying more
3. Hidden charges
4. Do your homework well
5. Owning multiple credit cards
6. Don’t spend beyond your means

9. Impulse credit card purchases
If you are an impulsive shopper, then foregoing a credit card cannot stop you from your instinct to shop.
Having cash in your wallet or Debit account can also support your urge to buy more. Instead, using your credit
card effectively for shopping can help you get amazing discounts and cashbacks, which makes you’re shopping
more rewarding.
Miss the payment cycle & you can end up paying more
It’s important to remember that payments made via credit cards is a type of loan, albeit free for a certain
period. Hence, it is important to pay off the monthly outstanding balance amount in full. It would prevent any
chance of your debt spiraling off to an unmanageable figure. Missing multiple payment also impacts your CIBIL
score and future credit worthiness which can have a very negative impact on future loans and credit card
approvals.

10. Hidden charges
Interest rate on outstanding balance is not the only charge in a credit card. Most credit cards charge a
percentage for cash withdrawal at ATMs. Avoid withdrawing cash on your credit card as long unless it’s an
emergency. In cases where swiping your card for the transaction is not possible, it would be a better idea to
use your debit card for cash transactions. Also, beware of penalties for exceeding the credit limit. This can also
lower your CIBIL score.
Do your homework well
Low introductory charges and annual fee waiver are used to entice the customers. It would pay off in the
longer run to dig deeper and read the fine print in detail. Ensure proper checks for annual fees, interest rates
and cash withdrawal charges, if any. Do also evaluate the value you get out of the card you opt for. Sometimes
the annual fees is offset with benefits & rewards that justify the small fee.

11. Owning multiple credit cards
Owning and managing multiple credit cards is too much of a hassle. You not only need to keep track and pay
multiple bills, but it is also tough from a security point of view. There are chances that you might lose a card
and might not be aware that you no longer have it. You also run the risk of running small debts on each of
credit cards, and there goes your perfect credit history in the bin.
Don’t spend beyond your means
Having a healthy line of revolving credit can lead you to spend beyond your means. Analyze and plan your
monthly budget in advance – be prepared to account for your essentials to luxury spends. As long as your
budget is balanced to your means, credit cards can always be your good friend.
Have you ever had trouble managing your credit cards or need help with selecting the best credit card based
on your requirements?

12. Repair your credit history & Build a positive credit score (CIBIL) easily
If you are having a poor credit score as per CIBIL (click here to learn more about the CIBIL score & credit
worthiness), you can leverage your credit card to demonstrate your ability to manage credit and repay the
credit regularly. You can boost your credit score immensely over 1-2 year with effective usage of your card.
Some key tips in that direction would be as follows:
•Limit your credit transactions to below 60% of the available credit limit
•Pay the due amount completely rather than a minimum due payment. Apart from the impact on your credit
score, you also pay an interest on the outstanding amount
•Analyze your requirements and accordingly, limit the number to credit cards you own to 4 and avail the
benefits. Anything above that is not required.
•On its website, CIBIL points out that 79% of the loans in India are approved for individuals with a score greater
than 750 so using a credit card can be essential in improving this score and the prospect of taking up loans in
the future.

13. Repair your credit history & Build a positive credit score (CIBIL) easily
If you are having a poor credit score as per CIBIL (click here to learn more about the CIBIL score & credit
worthiness), you can leverage your credit card to demonstrate your ability to manage credit and repay the
credit regularly. You can boost your credit score immensely over 1-2 year with effective usage of your card.
Some key tips in that direction would be as follows:
•Limit your credit transactions to below 60% of the available credit limit
•Pay the due amount completely rather than a minimum due payment. Apart from the impact on your credit
score, you also pay an interest on the outstanding amount
•Analyze your requirements and accordingly, limit the number to credit cards you own to 4 and avail the
benefits. Anything above that is not required.
•On its website, CIBIL points out that 79% of the loans in India are approved for individuals with a score greater
than 750 so using a credit card can be essential in improving this score and the prospect of taking up loans in
the future.

14. Repair your credit history & Build a positive credit score (CIBIL) easily
If you are having a poor credit score as per CIBIL (click here to learn more about the CIBIL score & credit
worthiness), you can leverage your credit card to demonstrate your ability to manage credit and repay the
credit regularly. You can boost your credit score immensely over 1-2 year with effective usage of your card.
Some key tips in that direction would be as follows:
•Limit your credit transactions to below 60% of the available credit limit
•Pay the due amount completely rather than a minimum due payment. Apart from the impact on your credit
score, you also pay an interest on the outstanding amount
•Analyze your requirements and accordingly, limit the number to credit cards you own to 4 and avail the
benefits. Anything above that is not required.
•On its website, CIBIL points out that 79% of the loans in India are approved for individuals with a score greater
than 750 so using a credit card can be essential in improving this score and the prospect of taking up loans in
the future.

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