Credit Cards – Advantages & Disadvantages


Are you already using a credit card? Or are planning to apply for one and are worried about the pitfalls of using a credit card? In this video, we have started by explaining the difference between a credit card and a debit card.

We have listed down the advantages of using a credit card:

1. The credit offered on a credit card works like an interest free loan – You don’t pay when you spend, but only by the due date for the credit card

2. Convenience – From the comfort of your home/office you can pay various utility bills and also streaming apps. You can also order grocery.

3. Helpful during emergencies – You do not need to worry about arranging funds when there is an emergency. You can use your credit card and pay later.

4. Limited fraud – Since credit cards are not linked to a bank account, the extent of fraud is limited to the credit limit on your card.

There are some disadvantages or rather pitfalls of credit cards as well.

1. High interest – Credit cards do work as interest free loans, but that is only so long as you do not exceed the due date of payment. In case of not paying on time, the interest charged on the balance amount can be as high as 35% to 40%.

2. Credit score – CIBIL keeps a watch on all loans taken by individuals and assigns them a score based on their credit history. So, in case you do not pay your credit card bills on time, or are making partial payments, it will cause a fall in your credit score. The credit score assigned by CIBIL is used by banks and NBFCs to decide the future loans you may apply for.

It is essential to keep 2 things in mind while using a credit card. Firstly, you must try to pay the total amount due on or before the due date. Secondly, the amount spend should be within your expense budget. Overspending on credit cards can lead to a lot of stress and financial problems.


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