Among various financial products available in the market, credit cards are one of the most underrated financial products for their benefits. What is worse, occasionally, they end up grabbing news headlines for their exorbitant interest rates and the behaviour of recovery agents.
However, if credit cards are used judiciously and the entire monthly outstanding amount is paid on time, they can give several benefits. In this article, we will focus on top ten credit card benefits.
Up to 50 days interest-free credit period
If your credit card bill is generated on the 1st of the month, you have to pay the bill amount by the 20th. For example, if you use your credit card on 1st March, the bill will be generated on 1st April, and you have to pay by 20th April. That gives you an interest-free credit period of 50 days. Depending on what date of the month you use the credit card, you can get an interest-free credit period of a minimum of 20 days and a maximum of 50 days.
Building and maintaining a credit score
A credit card is an excellent tool for building and maintaining your credit score. The credit score plays an important role in your loan eligibility criteria. Banks usually consider a CIBIL score of 750 and above as a good score for a loan. The higher the score, the better terms on which you can get the loan.
If you have just started working and don’t have a credit history, you can apply for a credit card. Use it regularly, pay the entire monthly bill on time, and build a good credit score. Later, a good credit score will make you eligible for other loans like home loan, vehicle loan, etc.
READ MORE: 5 major reasons why your credit card application can get rejected
The Government is encouraging cashless payments in a big way. Credit cards do away with the need for you to carry cash in your wallet. You can use them throughout the month for all your cashless transactions, whether offline or online. You need to make a single payment when the monthly bill is generated.
You can get regular discounts and cashback offers on various categories using credit cards. The discount/cashback may range between 5% to 50%. You may get discounts of up to 20% for categories such as groceries, fashion, electronics, consumer durables, etc. For categories like movies, food, etc. the offer may be a discount of up to 50% or buy one, get one (BOGO).
Base reward points, accelerated reward points, spend-based offers
Credit cards offer you reward points on most transactions. For every Rs. 50 to Rs. 200 spent, the bank may offer you 1 to 20 base reward points or 1x reward points. The bank may offer accelerated reward points on:
- Specific cards, or
- Specific spending categories, or
- Spends done between specific dates, or
- Transactions done on a specific platform, or
The accelerated reward points can range from 2x to 20x. Banks also roll out spend-based offers, wherein if you spend a specific amount within a specified period, you get additional benefits in the form of additional reward points (over and above based reward points) or gift vouchers.
The value of each reward point usually ranges from Rs. 0.20 to Rs. 1. Certain category transactions like fuel, rent payments, Government services, insurance payments, etc. may be excluded from reward points. It differs from bank to bank, and from card to card.
READ MORE: Searching for credit card? Here are three cards with good reward points
Benefits of co-branded cards
Banks tie up with companies in various categories, such as travel, food, fashion, movies, dining, healthcare, utility bill payments, etc. and offer co-branded cards. These cards offer various benefits like:
- A travel card may offer discounts, reward points, etc. on travel ticket transactions or free travel tickets/vouchers for achieving specific spend-based milestones
- A dining or movie card may offer up to 50% discount or a BOGO offer
- A healthcare card may offer discounts on medicines, doctor consultations, health check-ups, gym membership, etc.
Some credit cards offer free memberships on occasions like payment of joining fees, annual fees, birthday, achievement of some spend-based milestone, etc. or sometimes it is a part of the card offering itself. The memberships can be of frequent flyer programs (FFP), hotel chains, Amazon Prime, Times Prime, Forbes Magazine, Swiggy, EazyDiner Prime, etc.
Lounge access and airport pick-and-drop service
Some credit cards offer lounge access at airports (domestic and international) and railway stations. The access may be limited to a specified number of times in a quarter or year. Some premium cards offer lounge access to supplementary cardholders also.
Some premium credit cards offer airport pick-and-drop facilities. The facility is limited to a specified number of times in a quarter/year.
Chargeback against disputed transactions
The chargeback is a very good buyer protection facility offered by credit cards. When you don’t receive the product that you ordered, or received the wrong product, or the service was not as promised, you can raise a dispute with the bank against the merchant. The bank will investigate the matter. If the investigation reveals that the merchant is at fault, the bank will penalise the merchant and reverse the transaction. It means you will get your money back from the merchant through the bank. The chargeback facility is particularly useful for high-value transactions.
Some credit cards come with various insurance covers. Some of these include:
- Personal accident insurance
- Lost baggage insurance
- Air accident insurance
- Purchase protection insurance
- Loss of passport insurance
- Overseas hospitalisation insurance
- Lost card liability cover, etc.
The insurance cover provided by each credit card may differ in terms of the insurance cover amount, the duration, and other terms and conditions. These insurance covers are provided as part of a group insurance cover for all cardholders covered under it. The insurance coverage is free for the cardholder.
Use credit cards judiciously and enjoy the benefits
In this article, we have discussed 10 benefits offered by credit cards. Apart from these, credit cards offer other benefits also. However, you should use credit cards judiciously. You should use the credit card only for essential expenses and pay the entire monthly bill on time. If you do that, only then you will be able to appreciate and truly enjoy the credit card benefits.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn