🃏Myth about credit cards

Let's break the superstition about credit cards and make an effort to understand why credit cards are actually great and how can they help you attain financial stability.

Frank Abagnale on why a credit card is a superpower.

What's terrifying about credit cards?

If credit cards have so many pros, then what's stopping people from owning one? Are credit cards that terrifying? Yes, they can be, if you don't have financial discipline.

Owning a credit amount of 100k INR doesn't mean that you are entitled to spend that entire amount and go bankrupt by paying the interest. One should have a strict discipline in his/her expenditure and should make a spend only he/she has that amount in his/her account. But if you have that amount in your account, why should one pay via his/her credit card?

Because you can enjoy that free credit period till your credit bill arrives. You can invest that money in the equity market, or the liquid mutual funds (much recommended) and can liquidate once you have made profits and pay your credit bill.

Let me elaborate with an example. You are forced to buy a home appliance on Jan 1st, 2022 and you pay through your debit card. What happens? Nothing. Literally nothing. Your hard-earned money gets debited from your bank account and you need to be on a strict budget for the next 30 days of January until you get your salary.

Now, let's say you pay through your credit card. That means you can enjoy that credit amount and no money is deducted from your bank account. You can use that hard-earned money to invest them in any assets or in any form of investments (definitely not FD and RD please) so that you get a good return from that investment. Once you get your credit card bill, liquidate that investment and pay your bills. As simple as that.

How not to use a credit card?

• Pay your bills on time. The entire bill. Not the minimum amount. That's where banks play their trick. Banks will levy interest for the unpaid amount in the next billing cycle.

• Don't delay in payments otherwise, banks will again levy an interest which will coumpond over months.

• Don't get too excited with credit cards and never buy things that are out of your financial scope. Buy things and spend wisely and make sure that whatever you are spending, you will be able to pay them in next billing cycle.

• Don't maintain more than 2 credit cards. It will lower your credit score.

• Spend only 30% of your entire limit. For instance, if your credit limit is 100k INR, spend only within 30k.

• Use fintech apps like CRED (an awesome app) to track your expenditures and pay your bills.

So the bottom line, credit cards are best enjoyed by the disciplined. Let's educate people and families and break the stereotype and also encourage students and teens to use one.

Oh, wait? Don't we need to be above 18 to own a credit card? No, things have changed.

FamPay is a fintech company that motivates a financially aware generation and allows teens and students to own a credit card.