Benefits of Using a Credit Card in India
It is important to understand when you are issued a credit card and then you go and spend on it, that the rate of interest you are going to be charged can some times be extortionate if you do not pay your outstanding balance off within the period specified by the bank as being interest free, especially in a country like India where interest rates appear to be far higher than in the developed world. Understanding the interest rate and when it kicks in is therefore critical to your spending and saving decisions. That being said credit cards do have their advantages.
Credit Card Interest FREE Periods
Making purchases using a credit card is often a good idea because banks typically give you an interest free period to pay off the outstanding amount. In India, the interest free period can range anywhere from 30 to 50 days depending on who the card issuer is and how much they value your custom. Interest free loan periods are something you should look at when comparing the various credit cards on offer to see which is most suitable for you aside from reward programs and cost of borrowing. It’s essentially free use of someone else’s money after all; you may as well get the most that is available to you.
Consumer Protection when Paying with a Credit Card
The other benefit of using a credit card other than obvious one of deferring your payment is there is some degree of consumer protection on offer. Recently we have seen the advent of US$100 plus per barrel cost of oil. Many airlines have had to close down operations and their passengers have been left holding the bag because they purchased their tickets using cash and have effectively become creditors to a bankrupt company. Under consumer protection rules set by Visa and MasterCard themselves, the cardholder has every right to demand the payment (refund) from their card issuer (bank) if the merchant does not render service for which they have collected advance payments. This is called a chargeback in the credit card industry and all Visa/MasterCard cardholders can chargeback citing “Service Not Rendered” and is very useful in the challenging economic environment that we live in, which even the largest corporations do not seem to be immune to.
If you pay off your credit card balance every month in a timely fashion, then using your card for day to day activities provides a useful way to monitor your outgoing expenses, because you are sent a detailed statement every month itemising your expenditure, its effectively free record keeping for you by the bank subsidised by those that are actually paying interest on their outstanding balance. Some cards offer insurance, so if your purchase is stolen within a specified period of time you are covered. If you check with your issuing bank you may even find that you are automatically issued with travel insurance when you buy airline tickets. In India this is not the case when you purchase domestic flight tickets, you will have to check with your individual vendor or issuing bank if indeed you receive it when you book international flights.
There are many other benefits that come from using credit cards, which we will save for further discussions. Obviously the elephant in the room is the various reward programs on offer, and that will require a discussion of its own. Suffice to say responsible use of your card can make your life significantly easier and has its cost advantages.
>> Compare India’s best Credit Card Deals here
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[...] Using your credit card online gives you the same rights as discussed in my previous post on the benefits of using a credit card as you would receive were you making a physical purchase. If there is fraud or you do not receive [...]