Skip to main content

Why you should avoid credit card debt?

Credit card can be a wonderful thing. It can help you manage your cashflows, get some attractive deals and reward you with their loyalty program.

 Yet, credit cards don't come without its share of problems. And most of these problems are not about credit cards, but human behaviour. If not managed properly, they can soon lead you into a downward financial spiral which entails a never ending series of interest payments, balance transfers, bad credit rating, mental stress and more. So, it is important to handle credit cards with care and avoid credit card debt like plague.

 Here are some reasons you should avoid credit card debt.

  • Interest rates are really high - It can be as high as 4 percent per month (which comes to 48 percent per annum). And this is charged on the entire bill amount and not just the balance amount after you have paid it off partially. If not controlled, you can see yourself in a quicksand of interest payments. This can have a disastrous effect on your financial plans (if any, considering that you have landed into a credit card debt!)
  • Not paying your credit card bill on time can dent your CIBIL score (or equivalent credit rating score in your country) and this can make you difficult to apply for loan (home loan, business loan, car loan etc.) in future or get not so favorable terms if you take the loan.
  • Failure to pay your credit card bill on time is usually symptomatic of a deeper malaise - That of inability to control your finances. So, if you are unable to pay your credit card bill because your income doesn't match your expenses, this is unlikely to change unless your income increases your expenses decreases. And getting out of such lifestyle traps can often be difficult.
In addition to the above, getting into a spiral of credit card debt can have an adverse affect on your health, thanks stress that comes complimentary with credit card bills. This can severely impact your flexibility in life as you'll need to somehow keep servicing your credit card debt.
So, how can you avoid getting into credit card debt trap. Here are few tips.
  • First and foremost, use credit cards only if you have some control over your expense and can avoid impulse buying to an extent. Else, debit card or good old cash should be good.
  • Pay your credit card bill in full and on time. Always. Schedule the payments if you think you may forget making credit card payment.
  • Use credit card only for the purchases you could have made anyway with cash. So, if you can't buy that swanky new DSLR camera with cash, avoid buying it on credit too. 
  • Avoid exhausting your credit limit. Your credit limit is usually dependent on your spending capacity, and that you are close to it may be indicative of you biting more than what you can chew.  
  • Keep a track of your purchases and avoid surprises when you see the bill. 

Credit card usage can be a double edged sword. If you use it judiciously, it can be a good servant. If not, it can be an awful master.

__

 You can also read this on BeingFinWise

Comments

Post a Comment

Shop @ Amazon

Popular posts from this blog

The Forest

The Toyota Qualis and the Chvrolet Tavera stopped after a long journey. It was almost 9 in the night and it was pitch-dark. Night times in a forest are always pitch-dark. Adding to that it was a good `thirteen days since the last full moon day. Adding to this, the cloudy weather made visibility close to zero. Later in the night the forest would be engulfed in a fog making it nearly impossible to see. The only noise audible was that of silence, few random insects and that of a train going at a distance. After a long journey they all were quite weary and all they wanted was some rest so that the next day morning they can head for tiger and rhino spotting among many other species of flora and fauna in the wildlife sanctuary. Right now it was time for some parathas, maggi and booze. All fifteen of them headed for the cottage which they had booked, sat near the fire place relishing food, chit chatting about college life, universe and everything. But chit chatting wasn’t what they came ...
10 comments
Read more

Survival

Dark clouds were looming at the horizon. In few minutes they would have traveled few miles in westward direction and came closer. This is not usually the scene at noon in the hottest month of the year. Dark clouds meant something ominous. Probably sign of an impending storm or maybe a cyclone approaching. Sea is a capricious lady. Bay of Bengal was no different. It was infamous for cyclones, and Orissa was often at the receiving end of nature’s fury. Ramdas was few miles into the sea. So were his brethrens of the fishermen community. There were around a hundred boats in the sea that day. No one anticipated the storm. So no one even thought of staying back at the shore and miss out on their livelihood of the day. Ramdas was alone in his boat. He owned the boat. His son helped him with his job. They managed to get enough as to earn a square meal a day. They had a good rapport with others of fishing community. But of late that relationship was breaking down. No reasons for that. Nor wa...
8 comments
Read more

Child Labor

He was 10 years old. When asked he said that he was 15 years old. He didn’t know why. It was just that his master told him to do so. His name was Raju. When he was born, he was named as Shivkumar, but that name did not suit his master. So his name was changed. His master owned a small juice shop in some big institute, with around 500 people. Most of these students were his customers. They visited him regularly for juice, cold drinks, eatables, cigarettes etc. This was a popular hangout, chiefly because of large credit extended by Sharmaji Raju had 3 other siblings -Two sisters of age 13 and 11 respectively and a brother of 7 years. The eldest sister worked in a small carpet making unit. She has been employed since 3 years and worked for 12 hours a day without taking and day off. Probably, in a year or two she will be married to someone from a nearby village. Probably her family would get few thousand rupees in bargain! The younger sister was employed full time with a sort of well to ...
6 comments
Read more

Respect the sentiments

How often do we hear the above mentioned words? Especially in situations when there are chances of someone not taking anything well, or a comment not going down well with audience; in the situations when one needs to be politically correct and socially correct and be seen as morally upright. But if we remove the facade of the mushy gushy all-OK things, we can look into sort of ugly interiors of what respecting the sentiments mean ... and what it hides. Some of these reasons for expecting someone to respect the sentiments can be - 1. Person/ groups whose sentiments need to be respected are not open minded enough to hear a counter point of view, and my not be capable of any rational thoughts in that matter 2. There is something undesirable, or something ugly, or even something cancerous that needs to be hidden. 3. The truth might be extremely uncomfortable one, and ignorance might be a better option. 4. Deviation from the accepted norms is not desired. Reason - It has never been done so ...
Post a Comment
Read more

All for a Car

"Boss, I want a car" "What? "Yes. I want a car" The boss thought for a moment. Ravi was asking for a car. Maybe he needed one. He could give him one for an hour or so. The boss was the owner of the agency, which dealt in dealing with distribution of FMCG products of a big company and was a person who had a soft corner for his employees, something which is rare in such type of work. Ravi was a small time computer operator earning Rs 5000 a month at the agency. The job involved sitting in front of a computer in an air conditioned room and punching orders and preparing the bills on the company software. But the demand for a car was a bit shocking. No employee ever asked him for a car. "Why do you need a car?" "Boss. I am getting married" "Good. Congratulations" "Thank you boss." "So do you ..." "Sir, I have told my to be father in law that I earn 35000 a month and have my own car. I'll be engaged soon. He ...
6 comments
Read more