Credit Card is one of the most popular means of transaction worldwide. There are currently more than 2.8 billion credit cards in use worldwide. However, many users have both positive and negative thoughts about credit cards.
Due to negative perception, many people are eligible to get the card but they don’t want to get it. On the other hand, many users know the advantages and disadvantages of credit cards and they are regularly using credit cards to enjoy their benefits according to their needs.
It is a plastic card that is part of a special type of payment system. It is issued by banks as per the demand of their customers.
Using which the customer can purchase goods or services for their own use up to a certain limit. It is basically a type of loan, that the card user has to pay back within a certain period of time.
Currently, this card can be used to make purchases while shopping in many shopping malls. Again, the use of this card in online transactions has increased significantly.
Besides, if you take the dual currency facility of this card, it can be used for international transactions as well. The use of this card is increasing day by day for these features.
Advantages and Disadvantages of Credit Card
There are several advantages of using this credit card as well as some disadvantages, which are listed below.
Benefits of using credit card
#Gives Sufficient Repayment Time: With credit card loans, a grace period of 15-45 days is available to repay the loan.
#Free money can be used for investment: Many users take this loan and invest it in various short-term investments and pay back the money at a specified time. Although the payback time here is short, the gains from free money are good.
#EMI facility available: All credit cards offer an EMI facility. Users can use this facility to split the cost while purchasing something. This cost can be repaid through monthly installments.
For example, if someone wants to buy a fridge, he can buy it by paying monthly installments without spending his savings.
#EMI is more convenient than loan: EMI facility is more convenient than taking a loan. Most brands and retailers offer zero interest EMI facilities to boost sales. For example, in Bangladesh, Samsung provides a 3 to 18 months EMI facility for buying their official phones.
#Credit card purchases made easy: In addition, on credit card purchases, users can easily avail of the EMI facility by fulfilling certain conditions of the card issuer.
#Credit Card Comparatively Safer: Credit cards are considered safer than debit cards. Any purchase on a debit card is paid directly from the user’s bank account. As a result, the user is directly affected by any transaction through debit card fraud.
On the other hand, the user is not responsible for any unauthorized or fraudulent transactions from the credit card. This is the responsibility of the credit card network providers.
#Security services for users: Credit card network providers and banks provide various security services to keep credit card users safe.
#Has Reward Points and Benefits: One of the attractions of using this card is the rewards points and benefits. Some points will be given if you make purchases from certain shops and pay by credit card. By using these points the customer can get special gifts later on. Eg: Gift cards, travel packages, etc.
#Insurance benefits: Many banks offer insurance benefits with the card.
#Internationally Accepted: Credit card acceptance rate is very high for any international transaction. Carrying a credit card is comparatively more convenient for those who frequently travel abroad. These cards are acceptable in many countries because of the wide network of these card issuers.
Disadvantages of using credit cards
#The problem of unnecessary shopping: Due to the “Buy Now Pay Letter” facility, users of this card often end up doing unnecessary shopping, which can lead to problems later on.
#High-Interest Rate: Credit card interest rates are much higher than normal loans. If a user fails to repay on time, he is charged comparatively higher interest.
#ATM withdrawal charges are higher: Banks charge a hefty amount as interest for direct withdrawals from ATMs using these cards.
#There are some hidden fees and terms and conditions: Usually the card comes with some hidden fees and terms and conditions that the bank does not want to inform the customer first.
Such as processing fee, insurance fee, annual fees, GST charges, foreign transaction charge, markup fees, late payment fees, cash withdrawal fees, balance transfer fees, paper Statement fees, SMS fees, VAT, etc.
#Demerited Credit History Trouble: Not repaying the loan on time lowers the credit score and this record remains in one’s credit history as well. In the future, if you want to take another loan, this history may show the user as a defaulter and cause problems in taking the loan.
Credit card interest rate
In 2020, Bangladesh Bank fixed the interest rate of credit cards at 20 percent. Where the conventional loan interest rate is only 9 percent.
That is, if one cannot repay the credit card loan within the specified time, then he has to calculate 20% interest against the loan taken by him.
Before issuing a credit card, the customer should know the pros and cons of the card in detail. Get information from the bank about its hidden charges and other terms and conditions in detail and then purchase it.
Banks often try to convince the user to purchase it by telling them it’s good points only. The user has to understand whether this card is actually needed by him or is associated with the activities for which it is commonly used.
Credit Card-related questions and answers
Credit card interest rates are usually around 20 percent.
It is different from bank to bank. There are some banks that do not charge any transaction up to a certain amount. Some banks also offer virtual free cards.
It totally depends on you. You can make credit card purchases if you can pay on time and have a clear understanding of other charges, terms, and conditions and if you have no problem with that.
The credit limit is usually three to four times the salary.