There are a lot of speculation among the public when it comes to the matter of Credit cards. A lot of myths and misunderstandings mixed with real facts. Like a decomposing food, mixed truth is always dangerous. Here we are covering the reasoning behind the necessity for a salaried person to have a credit card.
What is a credit card?
In simple terms, it's a miniature version of loan, where you payback every penny you spend on a month within the next 30-60 days. During the month of spending, you will get the money from bank even if you don't have anything in your account. If you are late to repay the amount by 30-60 days, then there will be an interest adding to your principal amount (The amount you spend). If you keep up repaying in the exact duration, then no harm can taunt you.
Who is a salaried person?
A salaried person is basically an employee who works for a public or private institution or company. They will receive their salary once in a month either at the beginning or at the end. As the financial structure, a salaried person irrespective of the amount they gets, always have to depend on their employer and socially they belong to the middle class. They may get a salary of minimum 4 Lakh per annum up-to 50 lakh per annum depending on their job; which is on a monthly basis 35000 Rupees to 4 Lakh Rupees.
What is the problem with a salaried person?
Most of the salaried people belong to the category of 4LPA to 10LPA which is roughly 35000 rupees to 80000 rupees. When you have the money in your account you will spend it as you wish. The more you spend, the less you will have in your savings. At the end of the month, your salary would be mostly spend and you won't have anything else for an emergency. It's not a defect but an inherent human tendency to overspend. In such cases, a credit card gives you the order of organised spending.
Mostly, you would have a house rent or house maintenance charges, along with utilities bill like water, electricity, internet and other expenses. But most of the people never keep a book on their expenditures. They will only realise their low bank balance, when it actually go low. Then they will have to wait until the next month to get their salary; this cycle will perpetually continue.
How will a credit card help salaried person?
When a salaried person has a credit card, his money from the account won't be spend rather his credit would definitely rise. As the person spends more, the less his credit card credit will be. At the end of the month, they will receive their expenditure bill and this will definitely open their eyes wide as they will get a detailed overview on what they spend and where.
Sometimes, in the beginning they might overspend and will end in trouble, but the minimum 30 days repayment time allows them to adjust the overdue with their next month salary. Eventually, everyone will have an account of their expenditure and won't overspend for anything.
Apart form this, when a salaried person gets organised with the help of a credit card they will have two advantages inherently.
1. They will have a minimum savings, as they are always alerted by the repayment of credit card bill.
2. Secondly, the more they use credit card, the more their CIBIL Credit score rises. This will help them to get a loan from their bank with less securities and collateral. As a salaried person is always an employee, there is a limit for their income unlike businessmen and entrepreneurs. So, the best and most likely source of finance for a salaried person other than their salary is to get a loan from a bank. The more your credit score, the more is your chance of getting a loan approved.