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Are Credit Cards A Boon or Bane? Advantages and Disadvantages of a CREDIT CARD

Advantages and Disadvantages of a credit card

If banks are really after us to get a Credit Card, then there must be… ‘Daal me Kuch to kaala’.

But if that’s the case, why did BILLIONAIRE Kevin O’ Leiry gave his son this advice… “I told my son, as soon as you get it, Trevor… put $50 on the card and pay it off.”

Billionaires also get a credit card, even when they don’t need it… because there are some secrets about Credit cards that can help you get rich and by the end of this blog, I am going to tell you those secrets.

So, in this article are going to see… 3 DISADVANTAGES OF USING A CREDIT CARD, 3 ADVANTAGES, 1 SECRET ADVANTAGE where this piece of plastic can help you buy a house.

And towards the end, I’ll give you a Bonus Tip to help you understand how to use Credit Cards wisely.

Disadvantages of Credit Cards

So, you know what a debit card is right?

DEBIT CARD: It’s a card that deducts money from your bank account every time you use it.

CREDIT CARD: But using a Credit Card is like taking a quick loan from a bank and you have to repay back this money to the bank within a billing cycle, which is usually for 50 days.

These 50 days are your interest-free period.

Does it mean you can spend 10 Crores using a Credit Card on your first day? Not really.

You’re Credit Limit, i.e. how much can you spend using your Credit Card is decided by the bank, based on your…Income level, Credit Score… so on and so forth.

So basically, CREDIT Cards give people money that they don’t have.

And that creates problems.

Problem #1: They Promote IMPULSE BUYING.

Every website you go to, will show you an advertisement.

In fact, you must be seeing one right now.

It’s not wrong to buy. But when we are not in a good place mentally, just to get a quick buzz, we buy shoes we don’t need or that 5th Game of Thrones T-shirt that just lies at the back of a closet.

This kind of impulse buying is pushed further when you have a credit card, because with a Credit card you don’t have to pay now, you can pay later.

So, if you already have these emotional issues to resolve first, then credit cards might not be your friend.

Problem #2: They put you in a LOT OF DEBT.

Interest Rate of Home Loans… is around 8%. Car Loan… around 10, Personal Loan… around 12.

Do you know what the interest rate of Credit Cards is? Between 24 to 42% per annum.

That means, if you pay back the money to the bank within your billing cycle then okay… 0 interest.

But if you default by just one day, then here’s what happens.


  1. Interest from Day 1 of Transaction – You have to pay interest not just for one day, but starting from the day you made the transaction. Assuming you made it at the start of the billing cycle then your interest is on 51 days, not just 1 day.
  2. Late Payment Charges – Late payment charges will be applied.
  3. Taxes – You have to pay 18% GST on the overall interest accruing.
  4. No interest-free period for New Transaction – And God Forbid, if you make a new transaction, before paying off this old amount, then this new transaction won’t have any interest-free period and it’ll start attracting interest from Day 1. Apart from these payments, 2 solid ways that Credit Card companies make money are this…
  5. Cash Withdrawal interest – If you withdraw cash using your Credit Card, then you start paying interest right from Day 1.
  6. Minimum Amount Due – Credit card companies tell you… ‘Oh, so you have to pay 50,000 this month? Don’t worry… just pay 5% of it… i.e. the minimum amount due…and you won’t be charged a late payment fee.’ You think it’s a boon, but it’s not. Because you will still end up paying high interest rates on the remaining amount.

So the day you get your Credit Card, Swear to God that no matter what, you will pay your dues on time, because if you don’t…  

Problem #3: Credit Cards can spoil your CREDIT SCORE.

Now, listen to this very carefully.

A credit Score is a 3-digit number, ranging from 300 to 900.

This score is used by banks, credit card companies or even Insurance agencies to decide whether or not to offer you credit and what the interest rates would be.

Means, if you want to do Business or even have ‘Ghar-Baar-Bacchey’ in this country… then having a good Credit score is very important.

In India, there are some of the bureaus that keep track of our Credit scores, like CRIF, CIBIL.

I’ll tell you more about this score at the end of this blog, but for now, remember that… this score should never go down.

But if you don’t pay your Credit Card Bills on time… it will.

For now, those were the 3 problems of having a Credit Card.

But just like that GULAB JAMUN on my Veg Thali, I save the best for the last.

So, here are the Top 4 Reasons why Credit Cards are great…

Top Four Advantages of Credit Cards

1. Credit Cards have… Benefits.

If they are charging you so much interest, surely they must be offering something in return first.

Depending on the Credit Card you opt for, you can get benefits like…

  1. Reward Points – Every time you fill petrol, book air tickets, movie tickets, hotel rooms.
  2. No cost EMI offers
  3. Cashback offers
  4. Complimentary Lounge access at Airports – which we frequently use for international flights.
  5. Priority airport check-ins
  6. Insurance Cover for travels – in some cases.

But getting a Credit Card just to get free food at Airport lounges is silly.

The more important benefits of Credit Cards are…

2. They are Universally Accepted.

I bought my first Credit Card in 2012, when I had to travel to US for work, alone. It was my first international travel and I was told that Debit Cards might not work everywhere.

So before I left, I bought myself a Credit Card and thanks to it, I had no issues grabbing a quick meal in between a connecting flight at Heathrow where the currency was Pounds, paying for the cab from airport to the Hotel, and checking in at the hotel where the currency was Dollars.

And when I went out to see the world, it worked at all stores and amusement parks.

They also work across multiple websites, whether you want to buy an online course or set up a recurrent transaction at Netflix. But if you are using them everywhere, surely safety must be a concern.

Which is why, they also offer…

3. Strong Buyer Protection

These days, we seem to make a transaction at some new website every month.

The good news is, Reserve Bank of India has shifted the responsibility of proof of customer liability to the bank.

Which means, if you don’t get your order, you can ask the credit card company to raise a dispute against that transaction.

This is called ‘Chargeback’ and it protects you from fraudulent transactions.

But read the terms and conditions of your Credit Card carefully to ensure that they do offer the ‘Charge Back’ benefit.

And now is the time for the Secret Advantage…

4. Credit Cards… build your Credit Score.

In that video, this is what Kevin O’Leary was really saying…

As he said, you must establish your Credit Rating.

As we discussed earlier, Credit Rating or Credit Score is a very important number and one of the ways of building it, is to get a Credit Card, use it to spend small amounts, but repay it back immediately.

This repaying on time, over the years, is what will build your credit score.

And when you have a good Credit score, this is what happens…You can get a good premium for insurances.

You can negotiate the interest rate on your Credit Cards.

But most importantly, you’ll get a better interest rate on your loans… be it for Education, starting a Business or to get your Dream House.

In short, a Good Credit Score = A happy Life.

Because it can help you with your education, with your business and even your house.


I think by now you know that Credit Cards can either make or break you.

So to use them wisely, I am going to give you a simple formula.

While using Credit cards, remain SANE.

Remain SANE while using Credit Card

S – SPEND ONLY AS PER YOUR PURCHASE CAPACITY: CHADAR JITNI HAI, PAIR UTNEY HI PHAILAO. You are not taking Credit Cards for money, but to build your Credit Score.

A – AUTO-DEBIT: Auto Debit helps you from falling into the hell hole of paying interest, taxes, late fees… and getting a bad Credit Score.


E – EXTENSIVELY RESEARCH: Research about your Credit Card’s Annual Fee, Interest Rates, Hidden Charges, Credit Benefits and read the Terms and Conditions carefully.

The job of an agent is to just sell you a Credit Card, it’s your job to find out whether that Credit Card is useful for you or not.

So today’s Bonus Tip is this while using a credit card, remain SANE. Because that’s the only way to use Credit Cards wisely.

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