A credit card is a payment card issued by a bank or NBFC that offers cardholders a line of credit to make purchases. Credit card holders must pay back the borrowed money to the bank or issuing authority within a given period.

Credit cards have become an integral part of our daily lives, allowing us to make purchases without carrying cash. With various benefits, such as building credit history, worldwide acceptance, and cashback rewards, they are a popular choice among consumers, especially Gen-Zs and Millennials. However, credit cards also come with their drawbacks, such as high-interest rates and the potential for overspending, which can lead to accumulating debt.

Therefore it becomes increasingly important to understand the pros and cons related to credit cards in India.

Credit Card Benefits and Drawbacks

Pros of a Credit Card


A credit card offers a convenient way to make purchases without carrying cash. Credit cards can make payments for any purchase, whether online or at a merchant store. Credit cards have made it easier to make purchases without carrying a large amount of cash. Credit cards are also a safer and more secure option. Credit cards come with protection liability and extended warranties for their customers. Protection liability tends to safeguard the cardholder from any unauthorized or fraudulent charges reported on his account.

Builds Credit History

A person with no Credit history may find it hard to avail of a loan. Banks provide credit facilities to borrowers based on their credit history. The credit history is a record of creditworthiness, dependent on the borrowing and repayment ability of the borrower. Banks keep a timeline of the credit activity of an individual borrower and report that to the credit reporting agencies in India, viz, CIBIL, CIRF Highmark, Equifax, and Experian. These agencies assign a credit score based on the credit history. A good score will help the borrower to get loans approved from banks quickly. It will also help in availing of credit at a considerably lower interest rate.

Rewards and Incentives

Several credit card companies offer various perks and benefits to their customers like cashback, shopping discounts, gift coupons, travel perks, and other rewards. These benefits and perks available to the cardholder are mostly redeemable over a year. These rewards and incentives provided are to offset the cost of owning a credit card.

Fraud Protection

Credit cards offer fraud protection measures to help protect cardholders from unauthorized purchases and suspicious activity. These measures may include text or email alerts for suspicious activity, zero-liability policies that protect cardholders from fraudulent charges, and the ability to dispute unauthorized transactions. Cardholders need to monitor their account regularly and report any suspicious activity to their credit card issuer as soon as possible.

Worldwide Acceptance

Credit cards such as Visa and MasterCard and now even RuPay are accepted all over the world. When traveling internationally with a credit card, you don’t have to worry about currency conversion. However, you may be charged a foreign currency markup fee. Credit cards are useful for frequent travelers, as banks offer travel benefits like free access to airport lounges across the globe, discounts on hotel bookings, complimentary stays, and more. Using a credit card abroad provides security and convenience that cash simply cannot match.

Emergency Fund

Owning a credit card is like having a backup plan for unexpected situations where cash is needed urgently. It works as a safety net in your wallet that can be used in case of emergencies such as medical or financial crises. However, it’s important to remember that a credit card is not free money and needs to be paid back to the bank, possibly with extra charges.

Easy Loan Approval

Getting a loan approved through a credit card can be a quick and easy process. Many credit card issuers offer loan options to their customers, which can be applied online or through their mobile app. Customers with a good credit history and a steady income are more likely to be approved for a loan.

Cons of a Credit Card

Cost of Borrowing

Credit cards have a high cost of borrowing associated with them in the form of interest. Banks tend to charge a higher rate of interest on credit cards than traditional loans. This is because a credit card loan creates a revolving debt. A credit card loan does not feature a fixed repayment structure. Interest charged is based upon the credit balance of the borrower at the end of a billing cycle. Additional charges like service fees and late payment penalties on the unpaid balance get charged by the banks. These monthly charges can pile up quickly and can create heavy debt for the borrower. This is because the banks do not require payment of the entire balance at once. They allow the borrower to pay off their balance in the form minimum amount balance.


When using a credit card, it can be easy to lose track of how much you’re spending, especially if the track of your purchases isn’t kept. This can lead to overspending and accumulating debt that can be difficult to pay off. Credit card companies make it easy to spend more than you can afford by offering high credit limits and enticing rewards programs. Therefore, it is better to stick to your budget plans and use the card responsibly.

Affects Credit Score

A borrower is liable to repay the due amount with interest to the bank. When the borrower over-utilizes the credit balance available against the credit limit. It may affect the credit scores negatively. Several factors like a high credit utilization ratio and late payment of the amount would lead to low credit scores. A low credit score would affect the borrower’s financial health.

Hidden Costs

Credit cards can be convenient and offer many benefits, but they also come with hidden costs that many people are not aware of. These costs can add up quickly and make it hard to pay off the credit card debt. Some of the hidden costs of credit cards include annual fees, balance transfer fees, cash advance fees, and foreign transaction fees. It’s important to understand these hidden costs before choosing a credit card so that the cardholder makes an informed decision before applying for a credit card.


Credit cards offer numerous benefits like convenience, emergency funds, rewards & cashback, and help in building credit but they also have drawbacks like hidden costs, and overspending problems which can lead to debt. A cardholder should be careful and responsible while using a credit card to avoid potential danger.

Credit Cards have their benefits and drawbacks like most things in life. Credit cards are financial tools that can help individuals develop a better standard of living and achieve their financial goals. Before applying for a credit card, collect all the necessary information about your credit card and make sure you understand the interest rate, fees, and when the introductory offers expire on your card. People can also opt for lifetime free credit cards for maximum utilization.

Credit Cards Offers Convenient Transactions but Mindful Debt Management

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