Thursday, May 30, 2024

Credit cards: do we really need them?

Mohsin Khaiyam (Senior Sub-Editor)

Over the years, credit cards have gained quite a bit of popularity, as they are now very easy to get. Credit cards give the user the power to purchase things on credit with easy installments as well as reward points. However, with this power come great merits and demerits. We have listed some for you:

Merits of Credit Cards

Easy credit

A credit card gives you a credit line up to a certain limit based on your credit score, income, and other eligibility criteria. In some cases, even if you have a low credit score, you are given the option of a fixed deposit-based credit card. This makes it easier for the user to have a savings account and a credit line at the same time.

Builds your credit history

When you have a bad credit history, there are some credit cards for which you can negotiate some options with the bank. Using the cards and then paying them on time can help you get a good credit score. However, derogatory marks on your credit assessment will remain the same unless closed.

Rewards and benefits

Using a credit card also gets you rewards and benefits. For example, some credit cards offer reward points for using them. The rewards can be redeemed for cash as well as merchandise. Some of the credit cards allow you free access to airport lounges as well. These perks can add substantial value to your daily spending habits by effectively reducing the cost of items or providing experiences that you might not have considered otherwise.

Demerits of Credit Cards

High interest rates

While you get convenience from using them, credit card companies usually charge quite high interest rates. While using the card, people need to be aware of the charges. Most cards offer a period of interest-free time, but once you cross the time limit, you end up paying quite a lot of interest.


Credit cards are usually associated with a habit where the holder ends up spending more than they can repay. This leads to a credit trap. To cope with the line, the holder ends up continuously using more of it just to keep the credit flowing. Some people fall into a debt trap, and to survive, they start opting for more credit lines just so they can pay off the previous one. This cycle of borrowing to repay can create a precarious financial situation that is challenging to escape from, potentially causing long-term financial strain.

Hidden fees

While not all, some credit cards do have a hidden fee. The user gets to know it only after using the card. Carefully review the terms and conditions of a credit card agreement to identify any potential hidden fees. By doing this, you will avoid receiving unexpected charges.

Probable scams

Getting a credit card in today’s world is easy. However, being scammed is easier than that. There are a lot of scammers out there who will try to scam you by any means. Most of these scams happen through phone calls. Scammers usually pretend to be customer service agents and try to scam you by claiming that your card has been blocked. If you fall for the trap, you will end up losing whatever money is in your account or on your card’s credit line. Staying vigilant against potential scams is crucial to protecting your finances. Always verify the identity of the caller and never share sensitive information over the phone.

So these were a few merits and demerits of credit cards. You need to analyse the facts before deciding to get a card and use it. Overall, it is a convenient payment method, but it needs to be used responsibly. By understanding both the benefits and risks associated with credit cards, you can make informed decisions about their use, ensuring that you harness the advantages while safeguarding yourself against the potential pitfalls. Responsible usage is key to making credit cards work in your favour.

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