This article has been written by FinShiksha, a firm specializing in financial education for students who want to build a career in finance. They can be reached at https://finshiksha.com and @finshiksha on Twitter
Do we really need credit at all? Can it help in managing one’s finances better? Let’s say your average earnings have stabilized and your yearly investments and tax-saving plans are all in place. Why then, you could ask, would there be any need for CREDIT in your personal finance?
An average Indian generally considers credit as more of a bane than a boon. Agreeably, most of it stems from credit without discipline creating a problem, and not necessarily credit itself. However, if you are a disciplined credit user, credit offers an opportunity to optimize your cash flows.
Here are 7 reasons why using credit in your personal finance can play to your advantage:
1. Buy Now, Pay Later
Simply put, credit offers you the choice to purchase stuff now and pay for it later. In today’s world where products, technology, fashion and almost everything is changing so fast, it is always better to take advantage of the credit you have today and pay for it afterward.
2. Great deals, why not?
Since all credit companies are vying for the wallet share of the same customers, credit products offer you some remarkable deals, like zero cost EMI.
3. Get disciplined
Credit sometimes is the catalyst for financial discipline. Imagine yourself purchasing an iPhone on credit; you surely would want to ensure that all your EMIs are sorted, and as a result, are likely to ensure proper money management around your EMIs.
4. Build a healthy credit score
Using products such as credit cards enables the building of a credit score for you. When you go for your own house or car, this credit track record helps you to become eligible for higher amounts.
5. It is rewarding
Most credit products give you better reward points for every purchase, which can then be redeemed for other discounts or further purchases.
6. Speed and convenience
These days, innovative credit solutions can help you manage your finances better, without really going to a bank and following a cumbersome borrowing process for short term loans.
7. Track your expenses
Finally, using online credit solutions help you keep a tab on your spending patterns, which can help in optimizing your resources better.
India is unique in the sense that while nearly 60% of the country’s population has a bank account, only about 4% have a credit card. Thus, innovative solutions in the credit space are springing up. Developments in the fintech space are also contributing to this shift. Take, for example, ePayLater, which facilitates cardless credit, or a digital credit card.
A better understanding of how credit can be used to manage finances more efficiently could go a long way. The only requirement when using credit is to be judicious. The credit you use should be used in a way that benefits you and not becomes a pain. For that, you have to judge how much of a future income you can afford to give up to enjoy today. Once you have figured that out the world of fintech is there to help you do the rest!