Why I own Credit cards and should you?

TL;DR: Yes

I own three credit cards right now. I acquired all of them in the past 1.5 years. So, you can understand I have been relatively new to this credit system. Sometimes, I regret that I acquired them so late in my life. But, it is good that I own them now when I know how the credit system works. I would be sharing just my experience here. You will get a bunch of videos on YouTube explaining what are credit cards and how they work.

Why I didn’t apply in the first place?

• I could have applied for a credit card in my college itself just like one opens up a saving account in the bank. But, I was not aware of this product. Nobody else had it in my college.
• Credit card is a kind of loan. Hence, a debt. We are taught from the very beginning, that any kind of debt is evil.
• There have been so many stories been told by my parents and relatives how one was financially destroyed by his/her credit card debts.

How I agreed to have one?

At my workplace, I could see many financially responsible and stable people having credit cards. I asked some of them about the pros/cons:

• My colleague had it for emergency i.e. medical.
• My own uncle had it for the reward points. Apparently, you would never hear by your relatives that someone has a credit card and is still financially sound. Moral: It is good to learn from other’s mistake, but one should never ignore other’s success too.

Then, I thought, if people can have credit cards and still manage it well, and on top of it they are relatively financially sound than my own parents, probably I am missing on something. The bank, where I already had my saving account had always been keen on selling a credit card to me. And I always said no due to my prejudice. But, this time I said yes to Kotak Royale Signature credit card. What I only inspected in their brochure was fees/charges:

• Joining fee: Nil
• Annual fee: 999 ( waived on annual spending > 1 lac)

What changed?

• My billing date was 25th of every month. This meant I could buy something on the 26th of April and pay the dues on the 12th of June. A whopping 48 days of an interest-free loan.
• I tried to channel all my spendings through digital wallets i.e. Paytm. The money in the digital wallet is drawn from credit cards. Hence, even for a 10 rupees tea, I indirectly paid it through credit card. Nowadays, not every small shop has a POS machine but they do accept payments through digital wallets.
• Sales executives from other banks approached me for owning their credit cards. This time I only went ahead with two credit cards which did not have any annual fees: IndusInd Platinum Aura Edge and HSBC Platinum credit cards. From now onwards, I wanted to make sure I don’t end up paying any annual fees on credit cards. (In November 2019, I have also acquired ICICI Platinum — it gives me payback points)
• My bank increased the limit of the pre-approved personal loan amount from 1.5 lac to 7.5 lac (thanks to my CIBIL score).
• There would be usually some discount on online shopping sites for one or the other credit card that I had. So, I just used the right credit card for availing that. Sometimes, there wasn’t any discount on any of the cards that I own. Still, who cares, I had to buy the stuff irrespective of the discounts. So better that goes on my credit card than the debit card.
• The billing dates of four credit cards are different: 25, 5, 15, 18. Now, I used the credit card whose billing date has just been passed, so as to gain most days to repay the due. For example, if I had to purchase a dress on 17th October, I would use the card with the billing date of 15. This allows me to pay my dues on the 5th of December.
• I could now invest more money rather than keeping it in my savings account. Because, if in case I need money due to an emergency, the credit card is on the rescue. Maintaining liquidity is solved. I have a total credit limit of 5,49,000 rupees.

What did not changed?

• My spendings. Even though there are discounts. If I don’t need it, I don’t buy it. Mostly, these discount are like ₹500 off on purchase above ₹3000. If I want just a shirt worth only ₹400, better is to just buy that. Do not fall for the trap, to overspend and avail a ₹500 discount. If you really were buying a shoe worth ₹3000, then please go ahead with the discount. Don’t buy something just for the sake of the discount.
• While buying a TVS Scooty, the dealer said I had to pay 1% extra if I paid through credit card. I paid it through IMPS. It is better not to pay an extra amount for the sake of putting the spendings on your credit card.

Conclusion

According to me, credit cards open up a lot of options for you. But, if you are a person who has trouble managing a personal budget, please refrain from having a credit card. You would certainly find examples in society on how it can ruin your life.

P.S: Pay credit card bills and earn coins on CRED. Click here.