In today’s world, dealing in personal finance has changed substantially. Plastic money along with e-wallets has started replacing hard cash. Credit cards also play an important role when it comes to financial transactions. From booking flight tickets to movie tickets, paying telephone bills to even grocery bills, credit cards play a vital role. Needless to say, that they are one of the most convenient ways to make payments.

However, one must understand that, despite having a lot of conveniences, these cards come with their fair share of caveats. Yes. Purchasing through credit cards does not mean that you do not have to pay. It’s just that you pay after a few weeks and if you fail to pay off the due credits, you are charged substantial interest over and above it. Hence, one must exercise caution while using a credit card.

Financial experts and advisors are of the opinion that before opting for a credit card one must ask one self a few questions. Shweta Jain, financial advisor and Founder, Investography said, that the first question that you need to ask yourself is that “do you need a credit card as back up for financial emergencies?” Well, if that is the case, then you must reconsider your decision, said Jain.

Thus it is also important to understand why you should opt for a credit card and do you have enough reasons to justify the same? Here are a few questions that you should ask before availing a credit card:

1. Why do you need a credit card?

When asked this question, Jain commented, “a credit card is a two-edged sword. When used responsibly, it is a boon; else a curse. We need credit card, as we don’t tend to carry cash with us all the time. A credit card can also be used as a tool to fund emergency needs. It can also be used to get good deals. Does one really need a credit card- no! It is a matter of choice. If one can use it responsibly, get it.”

2. Do you have the capacity to repay within the time frame?

Well, financial experts are of the opinion that, it is the repayment when most cardholders end up being defaulters. You have the option of making a “minimum payment”— typically, 5% of the outstanding card balance to avoid paying penalties, but you still need to pay interest.

Credit card debts attract among the highest interest rates, and you may have to pay as much as 40% interest annually on your unpaid amount. This is supplemented by late fees, collection charges, or even legal fees. Repeatedly making only minimum payments would keep you in debt for a long time.

Jain said, “never look at the minimum amount due at all. If you cannot pay the full amount, stop spending. Don’t depend on the minimum amount due because there is interest being charged if you are doing that and that can seriously impact your spending habits and your finances.”

3. Does your credit card offer EMI options?

Do check out if your credit card offers EMI options. Even if you can pay off lump sum and buy a costly item, it is always a good idea to find out about the EMI options available in your credit card. The credit card must offer this facility, and it is very useful if you make regular multiple costly purchases. This reduces a strain on finances and you can invest money for higher returns.

4. Are dates flexible to pay bills easily?

Bill payment cycles pay an important role in credit cards. Hence it is advised that an individual checks out the flexibility in terms of bill payment. The payment date depends on the billing date. Hence, based on spending date and when you receive a salary, choose your billing date accordingly. Opt for a credit card with a bank, which is flexible vis-à-vis billing date and is willing to change billing date.

Having a credit card can offer a lot of benefits. It can offer perks and spending flexibility. Yet there are also risks involved and a credit card can end up costing you a lot of money. Therefore, before applying for a new card, make sure you ask yourself the four questions above.