Avoid Credit Card Debt Tips
Buy only what you can afford
One cardinal mistake people make is to use their credit cards for purchasing what they cannot afford to buy in cash. They overspend or go beyond their means. Think of your credit card as a temporary susbstitute to cash that you will have to shell out over the next billing cycle. The moment you think you can "manage" things later and make purchases beyond your affordability, you have stepped into unchartered territory. Very soon you will have spend much more than you can afford and trying to keep afloat in a sea of debt.
Pay your balance in full each month
If you want to avoid getting into credit card debt, make sure you are paying off your outstanding balance in full each month. That way you will never carry over your balance over to the next billing cycle thus avoiding the minimum amount to be paid trap. The reason we call it a trap is that by paying your minimum amount due each month you are only paying off your interest component and other charges that does not reduce your outstanding balance substantially.
Don't give your credit card to others
Friendship is in its own palace, but do not be magnimous and hand over your credit card to a friend, especially one who is reckless with his finances. If he hasn't got a credit card in the first place, perhaps his CIBIL report is not so great and the bank did not think of him as creditworthy. He may promise to pay you back the funds immediately, but if he does not, it is your credit that is at stake and you may be stuck in a debt trap for no fault of yours. Besides it can do substantial damage to your CIBIL score.
Do not ever consider a cash advance on your credit card
If you are thinking of taking a cash advance on your credit card, you have obviously not done things right. A cash advance may seem like a plausible and quick fix solution when you need funds in an emergency, but it is indeed the costliest credit. Cash advances on credit cards are charged as high as 35-50%. It is therefore a very high intrest loan, much higher than any other loan product.
Also, do bear in mind that even if your pay fixed amounts as credit card repayments each month, you credit card issuer will first use your payments to offset your regular balance first and then apply the remainder of your payment for the repayment of your cash advance. This means your cash advance will continue to accrue a high rate of interest. Furthermore, if you miss even a single repayment, you will end up paying a hefty amount to your credit card company as a late payment fee will be added to your interest charge. Cash advances are thus nowhere close to the quick fix solution that you had thought of it as.
As you can gauge by now, your credit card is quite a lethal piece of plastic that can get you into a debt trap sooner than you can imagine! What's more it can destroy your CIBIL score. To ensure that your credit card does not land you in trouble, make sure that you are using your card responsibly and paying off your balances in full. On the other hand, if you are using your card responsibly, it can be a good means to build a credit history that earns you a high CIBIL score. more
One cardinal mistake people make is to use their credit cards for purchasing what they cannot afford to buy in cash. They overspend or go beyond their means. Think of your credit card as a temporary susbstitute to cash that you will have to shell out over the next billing cycle. The moment you think you can "manage" things later and make purchases beyond your affordability, you have stepped into unchartered territory. Very soon you will have spend much more than you can afford and trying to keep afloat in a sea of debt.
Pay your balance in full each month
If you want to avoid getting into credit card debt, make sure you are paying off your outstanding balance in full each month. That way you will never carry over your balance over to the next billing cycle thus avoiding the minimum amount to be paid trap. The reason we call it a trap is that by paying your minimum amount due each month you are only paying off your interest component and other charges that does not reduce your outstanding balance substantially.
Don't give your credit card to others
Friendship is in its own palace, but do not be magnimous and hand over your credit card to a friend, especially one who is reckless with his finances. If he hasn't got a credit card in the first place, perhaps his CIBIL report is not so great and the bank did not think of him as creditworthy. He may promise to pay you back the funds immediately, but if he does not, it is your credit that is at stake and you may be stuck in a debt trap for no fault of yours. Besides it can do substantial damage to your CIBIL score.
Do not ever consider a cash advance on your credit card
If you are thinking of taking a cash advance on your credit card, you have obviously not done things right. A cash advance may seem like a plausible and quick fix solution when you need funds in an emergency, but it is indeed the costliest credit. Cash advances on credit cards are charged as high as 35-50%. It is therefore a very high intrest loan, much higher than any other loan product.
Also, do bear in mind that even if your pay fixed amounts as credit card repayments each month, you credit card issuer will first use your payments to offset your regular balance first and then apply the remainder of your payment for the repayment of your cash advance. This means your cash advance will continue to accrue a high rate of interest. Furthermore, if you miss even a single repayment, you will end up paying a hefty amount to your credit card company as a late payment fee will be added to your interest charge. Cash advances are thus nowhere close to the quick fix solution that you had thought of it as.
As you can gauge by now, your credit card is quite a lethal piece of plastic that can get you into a debt trap sooner than you can imagine! What's more it can destroy your CIBIL score. To ensure that your credit card does not land you in trouble, make sure that you are using your card responsibly and paying off your balances in full. On the other hand, if you are using your card responsibly, it can be a good means to build a credit history that earns you a high CIBIL score. more
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A lot of inputs and precautions on credit card usage. Good. Don't you all agree,Credit card is one means to develop and sustain financial discipline ? more
Oct 30
Yes Mr.Srinivas Reveankar. Ones I had made a trip of 2500 Kms free fuel trip which is earned form credit card points, they give on sending. You can do lot of things with wisely sent and paid on time. Credit card or debit cards are not bed but the who use wrongly and not paid or not able to pay. the person are wrong. Any thing in world, we use beyond the limit are wrong. more
Oct 30
Nicely written, I have a little different take on Credit cards. They are Bad but also have lot of advantages if used intelligently, get your head do the decisions rather than heart. Be it credit card or debit card, you tend to spend without realizing how much you are spending as the quantum of expense is realized only later. A non saver will spend money in any form he has, so lets not blame it entirely on the plastic money. Advantages I see are (might not be true for all); 1) security - No fear of loosing money 2) tracking - Can track where are you spending and how much, for cash expenses you will have to manage a dairy 3) Quick Credit - In cases of emergency you have money at your disposal, no need to ask friends or banks for loan 4) Ease of international spending - especially if you are travelling multiple countries, with max 3.5% transaction charge. 5) And ease of handling money and online payments. You dont need to be physically present to make payments. more
Oct 30
I totally agree with Mr. Pradeep Engineer. I am using with self decline for last so many years and know my payment capacity. You have to pay your full payment before due date, then you will not be in any trouble. But you spend more and not able to pay in full or timely, then you will be in trouble. Now a days most of card are coming with more safety features. more
Oct 30
Using Credit Cards is good provided self discipline is ensured. After all you get a credit of +45 days. more
Oct 30
