Credit Cards - Beneficial or Debt Trap?

Credit Cards – Beneficial or Debt Trap?

Credit card is gaining very much popularity in India nowadays. As of 2019,Β IndiaΒ had around 52 millionΒ credit card users. And this number is increasing day by day. Many credit cards companies and banks offer free credit cards to their customers. They also give many offers like cashbacks on credit card ownership.

Owning a credit card has many advantages and disadvantages too, as everything has two sides. In today’s blog we will discuss about those good aspects and bad aspects of credit cards!

Good Aspects of Credit Cards-

  • First and most important advantage of owning a credit card is it’s credit limit. You can spend, purchase, pay even if you have no cash in your pocket.
  • Secondly you get a 50 days interest free loan. You have to pay back the amount you spent through your credit card within 50 days. This gives you time and flexibility to pay back and also you can use the amount to liquid funds and can earn the interest.
  • Thirdly, the credit score. Credit score Β is a measure of an individual’s ability to pay back the borrowed amount. If you are using credit card and spending & paying back the money on time, then your credit score will be good and improve.\
  • Credit cards give you extra liquidity. If you have to pay during an medical emergency then you can pay through your credit card and also there will be no suddenness to pay amount back.
  • Sometimes, E-commerce companies tie-up with banks to offer cashbacks on shopping, bill payments through the bank’s credit cards or their own co-sponsored credit cards. Like Flipkart Axis bank credit card, Amazon ICICI bank credit card.

Bad Aspects of Credit Cards!

  • According to American Psychological Association’s studies, when people has credit cards they spent more than limit. You get tempted by the credit card limit and 50 days pay back period. This leads to spending more than you can afford and getting into a debt trap.
  • When you use a credit card to withdraw cash, you have to pay interest. The interest rate is similar to interest on late payments.
  • The interest rate on late payment of credit card is 1% to 2% depending on the issuer bank. But this interest rate is monthly. If the interest shown is 2% then it is 24% yearly.
  • And if your pay payment is late for one day after 50 days, then interest will be charged for 50 days, from the date of your transaction to the date of your repayment.
  • Their always annual maintenance fee on credit cards or minimum spending limit per year on credit cards. Many issuers give you credit cards free of cost but start levying annual charges from 2nd year.


Nothing is free of cost. If you use something at no cost or free then what you’re using is not the product, you are the product!

So in simple words, apply for credit card only if you can be disciplined!

Thank you for reading!

2 thoughts on “Credit Cards – Beneficial or Debt Trap?

Leave a Reply

Your email address will not be published. Required fields are marked *