Advantages and Disadvantages of using a Credit Card

Credit Card

Advantages and Disadvantages of using a Credit Card

The potential of the credit card users market In India has been exponentially growing. This booming segment of the financial market has turned credit cards from being a luxury item to a necessity. Digitization and technology have even made applying and receiving credit cards online - easy, simple, and convenient.

Further, owing to the pandemic and the forced social distancing, it is now safe and prudent to make purchases for essentials online. Thus, credit card usage has predictably increased. Credit cards have many advantages, but they also have certain negatives attached to them.

Advantages of using a credit card

  • Grace Period
  • Credit cards have an inbuilt grace period. Unlike debit cards, the funds in your account do not immediately get debited when you swipe your credit card. The funds are deducted only when you pay the credit card statement, at the end of the month. Hence, credit cards allow you to enjoy your product and service while the payment happens at a later date. It also allows you to earn on your funds in the interim period.


  • Safety
  • Typically the credit card companies release funds to their merchants after 2-3 days only. It means that in case a customer finds a fraudulent transaction on his card, he can inform the same to the credit card company, and the payment can be stopped. Thus, credit cards are a safer option.


  • Credit Score
  • You can also improve your credit card score by using your credit card wisely. Make payments regularly on your credit card will help raise your score and indicate that you are financially stable and sound.


  • Rewards and Bonus Points
  • One of the biggest advantages of a credit card is that you earn rewards, and bonus points that can be redeemed for attractive deals, offers, discounts, and coupons. 


Disadvantages of using a credit card


  • Debt Cycle
  • If credit cards are used in a rash and undisciplined manner, they will lead you into a vicious debt cycle. It would trap you in rising liabilities and make you, credit hungry. Hence, ensure that you never overspend on your card. Keep your utilization low and only use the card for your needs.
  • Fraud
  • Technology is a double-edged sword. Though it has made purchasing easy, it has also attracted many fraudsters and hackers. It has led to an increase in the number of scams and frauds related to credit cards. Thus, use your card cautiously and do not visit unknown websites. Remember that you should never save your password or credit card details on any device. Further, do not divulge your credit card details to anyone under any circumstances.


  • Annual Fees
  • Premium credit cards that offer attractive deals mostly have an annual fee attached to them. Creditors may offer to waive these fees if you reach a  limit of expenditure on your card. Hence, based on the value of your business relationship, your creditor may decide to waive the annual fees on the card. Have a transparent and honest discussion about this before you apply and use your credit card.
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