💳 Are You Risking Losses in Pursuit of Credit Card Benefits?

Balasahana Suresh
Credit cards are convenient tools, offering perks like cashback, reward points, travel miles, and exclusive discounts. But these benefits come with hidden costs — mainly high interest rates and fees. Many users end up paying far more than the rewards they earn. Understanding the balance between benefits and risks is crucial to avoid financial pitfalls.

🔹 How Credit Card Benefits Work

Credit cards entice users with multiple incentives:

  • Cashback: Percentage of spending returned to your account.
  • Reward Points: Redeemable for products, flights, or gift cards.
  • Sign-up Bonuses: Extra points or cashback for meeting initial spending targets.
  • Discounts & Offers: On shopping, dining, travel, and entertainment.
While these perks seem attractive, they’re worth little if you carry balances and pay high interest rates.

⚠️ The Risks Behind Chasing Rewards

Using credit cards without discipline can lead to financial losses:

High Interest Charges:

Average credit card interest rates range from 24% to 40% annually in India.

Carrying even a small balance over months can wipe out your rewards multiple times over.

Late Payment Fees & Penalties:

Missed due dates attract fees (₹300–₹1,000) and penalty interest rates (~3–5% extra).

Penalties can quickly outweigh any cashback or points earned.

Credit Score Impact:

Excessive borrowing, high utilization, or late payments can reduce your credit score, affecting future loans and mortgages.

Over-spending Temptation:

Credit cards make spending easier, leading to purchases you might not have made otherwise.

Chasing points or rewards can make you buy things you don’t really need.

💡 How to Use Credit Cards Wisely

Pay Full Balance Monthly:

Avoid interest by clearing dues before the due date.

Track Reward Value:

Calculate if the reward points or cashback truly exceed potential interest or fees.

Avoid Unnecessary Purchases:

Treat credit cards as a payment tool, not a free spending ticket.

Set Alerts & Limits:

Use app notifications for due dates and spending caps.

Choose Cards Strategically:

Select cards with benefits data-aligned to your regular spending habits — e.g., travel, groceries, or fuel.

Balance Transfers & Low-Interest Offers:

Consolidate high-interest card debt into 0–12% interest offers if necessary.

📊 Example: When Rewards Don’t Pay Off

Suppose you earn ₹500 cashback in a month but carry a ₹50,000 balance at 36% APR:

  • Interest for one month: 50,000×36÷12÷100=₹1,50050,000 × 36 ÷ 12 ÷ 100 = ₹1,50050,000×36÷12÷100=₹1,500
  • Cashback earned: ₹500
  • Net Loss: ₹1,000
This illustrates why paying off balances on time is critical.

🏁 Bottom Line

Chasing credit card benefits can backfire if not managed carefully. To enjoy perks without risking losses:

  • Pay full balances monthly
  • Track real reward value vs. potential interest
  • Avoid over-spending and late payments
  • Choose cards data-aligned with your lifestyle
Credit cards are tools, not free money — discipline ensures they remain beneficial rather than costly.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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