Credit cards are a convenient and essential tool that can be used for everyday purchases ranging from groceries to gas and paying bills like electricity and tuition fees. Credit cards are versatile and can also be used to pay for our shopping spree, or buying a gift for someone.
However, it is imperative that we use credit cards responsibly. One shall only pay through credit cards if they have the capacity to pay back the money to the bank later. Otherwise, it can result in a debt trap which has its own drawbacks.
Credit cards come with a lot of benefits, and this is how the person not using a credit card loses .
top benefits of using credit cards are:-
- Rewards such as cashback or reward points
- Using a credit card increases the credit score
- No foreign transaction fees
- The 1-month lag period allows you to earn interest
1. Rewards such as cashback or reward points
Paying through credit cards allow us to gain several rewards offers including cash backs, reward points that can be converted into a purchase later, vouchers, etc. Hence, the person who does not use a credit card at all loses out on these exciting benefits.
2. Using a credit card increases the credit score
When you pay through credit cards and make the desired card payments on time, it improves your credit score. This three-digit number shows your creditworthiness and is a vital tool to measure your financial capacity nowadays. It is the first thing that banks or lenders check when you apply for a loan and matters quite a lot. This is why, a person who has the capacity to use a credit card but chooses not to, loses out on the credit score that can actually help him or her apply for a loan when needed.
3. No foreign transaction fees
Most credit cards offer no transaction fees on foreign payments. They wave off the international fees, which also comes with travel benefits, at times.
4. The 1-month lag period allows you to earn interest
Every credit card comes with a payment cycle. This payment cycle will enable you to purchase the item without paying the money immediately and gives you a time frame of about a month to do the same. It is one of the useful lessons most parents should teach their kids about money. This 1-month period then enables you to earn interest on this particular amount, which you have already spent, if you invest it wisely, or keep it in your savings account.
These are the four main things a person loses out on if they do not use a credit card. One must remember that a credit card majorly acts as a loan that needs to be paid back timely. Failure of doing so results in an additional interest charged monthly, up until the point you clear all your dues. One should also make sure that their credit score is always above 750, in order to be in the good books of lenders. This makes them eligible for a personal loan with no hassles.
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