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Credit card use can translate into unwanted debt; Here's how you can avoid

A woman pays with a credit card at a restaurant in Playa del Ingles, Maspalomas on the island of Gran Canaria, Spain, May 3, 2022. REUTERS/Borja Suarez (REUTERS)Premium
A woman pays with a credit card at a restaurant in Playa del Ingles, Maspalomas on the island of Gran Canaria, Spain, May 3, 2022. REUTERS/Borja Suarez (REUTERS)

  • Credit cards are not necessarily evil if you know the right way to use them. An understanding of how debt can ruin your finances will go a long way in realizing that adding to credit card debt will destroy your chances of saving your money and amassing your desired corpus in future.

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There is so much hype and fear surrounding credit cards that some have even gone to the extent of dubbing them “Satan’s tool". However, irrespective of the hullabaloo surrounding these plastic cards, you cannot deny that they come in handy whenever you make purchases. These credit cards allow you to buy without having to lose the money from your savings account. However, these benefits come at a cost that can be hefty if not paid in time.

Credit card debt is one thing that bugs many people of today’s generation. Millennials unaware of how credit card companies charge end up reeling repaying a huge amount as penalty and interest. This coupled with new hacks like revolving credit card usage and interest-free periods have pushed many users into an inescapable debt trap.

Not that credit cards are all evil. How you use them is a deciding factor in whether these cards are genuinely useful or plainly a source of debt for you to repay. When credit cards tempt you to spend more, remember that the problem lies with you and not with the card. The exorbitantly high-interest rates only exacerbate the situation wherein you fall into a vicious and never-ending cycle of debt and the subsequent interest.

Pay the Minimum Amount Due (MAD)

It’s good to be MAD with credit cards as paying the minimum amount due before the due date will save you from paying late payment fees while shielding you from taking a possible hit on your credit score. Also, paying this minimum amount before the due date will keep your card account regular. However, this does not mean that paying the minimum amount due is sufficient as you will then be charged interest on the outstanding balance. Though repaying the MAD in due time will save you from the brunt of paying late payment fees, it will not save you from the high-interest rates charged by your credit card company.

Ignore getting into hacks

Never fall into the trap of marketing gimmicks or hacks like revolving credit card usage or the alleged benefits of having multiple credit cards, etc. Credit card companies resort to social media marketing to lure the young generation into keeping multiple credit cards. You will also find many finfluencers advocating for multiple credit card usage to benefit from longer interest-free periods. It helps to be simple. Stick to not more than one or two credit cards to escape the tendency of overspending and escape the burden of interest and late payment fees. Also, limit the use of these cards unless absolutely necessary. If you are unable to buy something using cash, try using a debit card. Paying through a credit card should be the last thing on your mind.

Debt may not always be backbreaking if you realize the need to get rid of it within the due date. Credit card debt is like any other liability that you must get rid of or prefer not to incur. As per the most recent statistics available, out of every 100 people in India, three persons use credit cards. The number is slated to increase with the industry focusing on how to encourage people how to rely on credit for their daily transactions. While this would be a big boost to the banks and credit card industry, rampant credit card misuse may force many people to spend their lives repaying unwanted debt stemming from buying things on credit.

 

To read more such stories, go to MintGenie

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