Credit cards have become an integral part of modern financial life, offering numerous benefits beyond simple purchasing power. When used responsibly, these powerful financial tools can provide significant advantages to cardholders. In this comprehensive guide, we’ll explore the top benefits of credit cards and how you can leverage them to improve your financial well-being.
Building and improving your credit score
One of the most significantbenefits of a credit cardis its potential to help build and improve your credit score. Your credit score is a crucial financial metric that lenders use to assess your creditworthiness when you apply for loans, mortgages, or even new credit cards.
How to improve your credit score with a credit card
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Make on-time payments consistently
Late payments can significantly lower your score and stay on your credit report for up to seven years.
Maintain a low credit utilisation ratio (ideally below 30%)
This refers to the percentage of your available credit limit that you’re using. Keeping this ratio low demonstrates responsible credit management to lenders and positively affects your score.
Avoid applying for multiple cards in a short period
Every time you apply for a new credit card, a hard inquiry is placed on your credit report.
Keep old accounts open, even if infrequently used
The longer your credit history and the more accounts you have in good standing, the better it is for your credit score. Even if you don’t use an old credit card often, consider keeping it open, especially if it has a high credit limit and no annual fees.
Monitor your credit report regularly for errors or fraud
Checking your credit report regularly allows you to identify and dispute any errors that could be bringing down your score.
Rewards and cashback programs
There are several types of rewards programs offered by different credit cards. To get the most out of your credit card rewards, choose a card that aligns with your spending habits and use it for all eligible purchases to maximise points or cashback. Pay attention to rotating bonus categories and special promotions and redeem your rewards strategically for maximum value.
Consider using multiple cards to optimise rewards across different spending categories. By strategically using rewards credit cards, you can earn significant value on purchases you would make anyway, effectively reducing your overall expenses.
Travel benefits and insurance
For frequent travellers, credit cardscan offer a wealth of benefits that enhance the travel experience and provide valuable protection. Many credit card benefitsinclude travel insurance coverage for trip cancellation, interruption, or delay. Rental car insurance can save you money on the expensive insurance offered by rental car companies. If your bags are lost or delayed, your card may provide lost luggage reimbursement.
Fraud protection and security
In an era of increasing digital transactions and cybercrime, the fraud protection offered by credit cards is more valuable than ever. For instance, IndusInd Bank Credit Cards come with the Total Protect program to safeguard cardholders against unauthorised charges up to the card’s credit limit.
Card issuers also use sophisticated algorithms for real-time fraud monitoring to detect suspicious activity and alert you immediately. EMV chip technology makes cards much harder to counterfeit compared to traditional magnetic stripe cards. Some issuers offer the ability to generate temporary virtual card numbers for online purchases, adding an extra layer of security.
To sum up
Credit cards offer a wide array of benefits that go far beyond simple purchasing power. From building credit and earning rewards to providing valuable protections and travel perks, these financial tools can significantly enhance your financial life when used responsibly. By understanding and strategically leveraging these benefits, you can maximise the value of your credit cards and work towards achieving your financial goals.
