Are Credit Cards a Trap or a Tool? A Balanced View for Indian Users

Multiple people use credit cards - some think it is a trap, while others think it is a tool. But what do you think? So is it true? Are credit cards a trap or a tool?

Let’s understand first what is credit card is- it’s a short-term loan from a bank that allows users to pay them later. You get some limit according to the purchase of your credit card, if you pay the amount before the due date, there is no interest you have to pay. There are two sides such as:

How a credit card can trap you?

High interest rate

• First, if you fail to pay the amount or pay only the minimum due, they will charge 30% - 45% p.a on the remaining balance.
• These compounds keep on increasing if you don’t pay, and can turn into a serious debt. 

Spending a lot

• Having a credit card often makes us spend more than usual
• Platforms such as Amazon, Flipkart, and Swiggy offer one-click checkouts with saved cards

Hidden charges 

• If you do the late payments, cash withdrawals, and over-limit charges, many users are unaware of these costs

Impact on CIBIL score

• If your payment is delayed and missed, it will affect your credit score, which will affect your future loans if you try to take it out anytime.

How can credit help you?

Cashback and rewards

When you do the payment with a credit card like SBI Cashback, HDFC Millennia, and Amazon ICICI offer flat cashback, it gives you cashback, rewards, and points on fuel, shopping, groceries, and online shopping.

Building a credit history 

With the help of credit cards, when you pay the due amount on time, it helps you create a good CIBIL score that helps in many things, such as taking a loan without any issues.

Short-term emergency credit 

It helps you at a critical time when you know you don’t have money, so you pay through a credit card, and some have options available for EMI, so you can pay at a lower interest rate.

Travel and lifestyle benefits 

Using cards like HDFC Regalia Gold, Axis SELECT, or Amex Gold, offering services like free lounge access, hotel rewards, etc. 

 

How a credit card can be a smart hobby 

• Pay the full amount, don’t just pay the minimum
• Set up the Auto-debit so you don’t face any issues with late payment
• Always use 30% to 40% of your credit card limit to keep a healthy credit score
• Use it always as a planning spending, not just for thinking and buying 

Final thoughts

Credit cards are like a knife; if you use them in a good way, they’re valuable, but you don’t know how they can turn into a dangerous weapon.

It can help you manage cash flow, build a good credit profile, and just try to control your spending; then, this credit can be your financial ally