You can find various money-back credit cards in the market. The annual fees of such credit cards are as low as 500 INR. At the same time, the benefits that you get on these credit cards are quite satisfactory.
Individuals who do not have any credit history can take this money back credit card. It can be offered to those people who are new to the credit card domain.
What are cashback credit cards?
Money-back credit cards will give you an opportunity to gain rewards while making purchases. Every month you will find a chance of winning money. You can try to use the card regularly to get a check for a high amount. It will incentivize the amount you spend on the card.
There are some risks attached with money-back credit cards and free credit cards. Some of these includes:
- The reward points on the money-back credit card happen to be for only a few years.
- The rate of cashback for such a card is also low when you compare it to the general credit card.
- The credit card issuer can charge a reward redemption fee when you will redeem any points for the purchase of goods.
- It does not offer other benefits, including travel benefits or basic privileges.
Various risks involved with money back credit cards are-
The fraud involved with the credit card companies
The fraudsters tend to initiate credit card frauds while duplicating the credit card at any ATM or sale point. It can be done when the fraudsters receive all your details over the phone or by email. To reduce this problem, you can stay vigilant all the time, and it would do half of your work. Moreover, you should never share any sensitive details with others. Also, you must swipe your card in front of you to ensure maximum safety.
Besides, if you can get the credit report at a regular interval, you can detect card fraud or identity theft.
Reduction of the credit score
Any transaction of a credit card happens to be equal to the act of taking a loan. The credit bureau notes down all the records of payments, including defaults or late payments. If such a cause occurs, it can severely affect your credit score. Besides, if you have a higher credit utilization ratio, your credit score would also be affected. The lender usually considers a 30% to 40% credit utilization ratio. Any credit bureau board tends to reduce your credit score if you bridge this level of ratio.
Credit cards have somehow become very important for everyone nowadays. It helps to tackle the turmoil in the financial life of a person. But if one tends to overspend on their credit card, it becomes very risky for that person. Credit cards tickle the desire to consume or buy more things. The cashback and discounts provided by the credit card issuer tend to attract many people to indulge in credit cards. It results in more shopping than the user can usually refer to. But if one maintains a strict financial discipline, they can use the money back credit card efficiently.
Furthermore, the credit card companies charge a finance charge for the non-payment of your bill amount. This charge can be somewhere between 22 to 47 percent per annum. Once you pay the minimum amount due, it can only save you from the late payment fee. But it does not save you from any finance charges. If you fail to repay the entire bill, the transactions will attract the finance charges as long as you keep any old unpaid balances.
Moreover, money-back credit cards or free credit cards are best for users who are new to the world of credit cards. With easy approval, you can enjoy many benefits of credit cards. However, it does not provide the credit card holder with exclusive benefits.