What does the term credit mean? Why are people hesitant when it comes to credit? Credit is basically defined as a mutual agreement between the borrower and the money lender. It helps in determining an individual or a business’ creditworthiness or credit history. Having high credits and not repaying them works as a major disadvantage only to the applicant.
Who are low-income people?
Low income people are people who are nearly at the risk of poverty and struggling to make their ends meet. They work odd and menial jobs to make sure they can run the family. Their income is mostly less than 60% of the equivalent median money income of all other households.
What is the purpose of getting credit cards?
Cash back: If you choose the right credit card, and pay the bills regularly. You can earn from 1% to 5% back on the purchases that you do.
To build your credit rating: If you have spoilt your credit rating in the past which might have been because of not managing your borrowing properly, or a low score because you have never used a credit card in your life. However, you can continue to build your credit scores using a credit card- you need to be extremely careful in the paying of the bills. You need to pay the bills completely every month and not in instalments.
Reward points: Most credit card companies provide reward points for any and all purchases that you make with your credit card. You can then use these points to purchase gifts for your loved ones and for yourself.
Investment rewards: There are some cards that are existent in the market that offer higher rates of cash back; in exchange for that you need to deposit your cash bank directly into another account.
Equated monthly installments: If you are buying or making a big purchase, using your credit card you can easily convert it to affordable monthly installments. Banks usually charge interest for conversion to EMIs.
Security: Owning a Credit Card gives you a sense of security. When your financial situation gets tight or unmanageable situations occur. Having a credit card might help to put food on the table or keep the lights on in your house. By not over-using or over-exhausting your card to its limit, you would have some money saved up or available in the case of an unavoidable emergency, such as the unexpected car repair or any other medical emergency. These credit cards also come along with the feature of fraud protection, which would cover for your losses if you have been the victim of a scam, and permits you to create a special one-time card number, to keep your actual credit card information safe.
Why are credit cards needed for low income people?
Even if they are people who are struggling to make their ends meet. Having a credit card would work to their benefits, because they wouldn’t do lavish purchases and would have money saved up which can be used for other expenses, in case of emergency or children’s education. One such bank that offers credit cards for people of low income is the United Bank of India with their United Bank of India credit cards.
Conclusion: A credit card has a lot of advantages and seems to be more affordable now. People who are earning a low income when compared to others, can invest in getting a credit card because it offers a lot more benefits for them, which would be more helpful than not. The advantages and the purpose of the credit card is mentioned above.
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