Do Credit Cards Make You Financially Independent? - Kotak Bank
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22 DECEMBER, 2021

Financial independence is a crucial need in today's world. It doesn't matter if you are a high school student, a recent graduate, a homemaker, or a salaried individual.

Broadly, financial independence can be defined as having enough income to pay for your expenses without dependence on others. In other words, it is having a set of marketable skills, using it to generate income, and using that income in a calculated and risk-free manner.

Financial freedom means different things to different individuals. Earlier, it was synonymous with retirement. But for millennials, the definition of financial freedom has evolved. Today financial independence means to spend as and when you please, without depending on other factors, to create and upkeep a gratifying lifestyle.

It is where a credit card comes into play.

Let us see why Credit Cards are the best financial instrument to achieve financial independence:

1. Uneven Income, Steady Expense:

In recent times the world has experienced unpredictable income fluctuations for many. At times like this, Credit Cards are the best way to balance things out. You can move your monthly fixed expenditures like food, rent, fuel, fees, etc., to your credit card and free up liquidity for other emergencies. This way, you can also claim the fantastic rewards and points that are awarded for optimum spending.

2. Being Credit-Worthy:

In terms of financial independence, having a good credit score is critical. It includes being credit active, maintaining a good credit score, and having a clean credit history.

CREDIT CARDS make your credit active. And when used wisely, it also helps you build a strong credit score. All you need to do is pay your credit card bill on time and avoid missing payment deadlines. It will clean your credit record and, in turn, increase your creditworthiness.

3. Staying on Track:

Expenses are managed better when they are budgeted and tracked. Credit Cards are a stable way to manage and keep track of your expenses with monthly statements and financial transactions records.

There are several applications and tools to keep track of your transactions and remind you for timely payments of your credit card bill, ensuring good financial behaviour on your part.

4. Going Cashless:

In this new Digital India, Credit Cards and digital wallets are now accepted even in remote corners. Going cashless ensures that you do not have to carry large amounts of cash along with you wherever you go. You can now swipe in your credit card for any purchase, and the amount gets added to your monthly credit card bill.

5. Increased Purchase Power:

Another aspect of financial independence is having sufficient cash at your disposal without the added worry. The lenders will reward you with a high credit limit every once in a while if you maintain a good credit score. With an increased credit limit, your purchasing power also increases substantially.

6. Buy Anything, Anytime:

How many times have you stopped purchasing due to the unavailability of liquid cash? With a Credit Card, you can buy anything anytime, making use of the attractive EMI options. You can pay for your purchase in monthly instalments that suit your convenience. The amount will be distributed over your credit card bill every month. The added discounts offered on your credit card purchase sweeten the deal even more.

7. Financial Buffer for Rainy Days:

CREDIT CARDS become lifesavers at times of emergencies. Being cashless is not a matter of concern anymore, an unforeseeable medical expense or some sudden expenditure. Credit cards allow you to eliminate financial dependencies and manage your finances without the added worry.

Read Also: Exploring Instant Discounts with MakeMyTrip

8. Reap the Rewards:

Each time you make a transaction or pay your credit card bill on time, it fetches you discounts, reward points, cashback, air miles, extra credit, and other attractive rewards. Air miles can be encashed for free air tickets and accommodations, whereas reward points can redeem gifts and cash backs. You can choose a credit card that suits your lifestyle for maximum benefit.

9. Freedom Beyond the Borders:

Most credit cards support international transactions to allow international purchases. International e-commerce sites require a global credit card without any additional fees for international purchases. However, adverse currency conversion rates favour the card issuer, which is just a small price to pay for unlimited global access.

If not used wisely, CREDIT CARDS can be a potential financial threat. Maxing out your card, not paying your dues or paying the bare minimum, not paying your credit card bill on time run the risk of ruining your credit score and threatening your financial stability.

However, when used wisely and responsibly and in moderation, it can be your greatest ally in attaining financial independence. Make sure to use your credit card wisely and not be reluctant or ignorant to pay your dues on time.

Read Also : क्रेडिट कार्ड की लिमिट

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.