A Credit Card also known as plastic money. It makes a person feel like he has money. Even though he has no money with them. If we watch this carefully, by using Credit Card, we are buying the stuff on CREDIT. *People might think that what is the big deal.? At least, they do not ask anyone for money. They do not have to take any loans. If we are spending extra money, we saved our “honour”. However, there is a big question too in Credit Card usage. When we take a loan from the bank, we take them for some important work. If we look at the credit card statement, whatever we have bought, was it used in emergency?
By increasing the buying capacity, credit cards usually spoil our habit. So that we can also buy stuffs which we should not need to buy. Tell me if there is no EMI option, will so many people buy I phone by paying so much money at once. Due to the EMI option, a person whose salary is 30k or 35k is also buying I phone with ease. And this gets us into the Debt Trap. Firstly, it allows the user to buy a costly phone by paying extra more than their capacity. And then the job they were doing on their terms, they have to do it in compulsion for managing the finances. After this the credit company bank gives the user the option of minimum amount payment option. This is a kind of trap. The reality is that even if you keep making the minimum payment, you will keep paying throughout the year, even then it will not be completed.
Banks wants us to miss on our credit card EMI. This opens the rest of their option of generating income from us. The penalty charges on the late payment is 2% - 3% monthly, which comes to around 24% - 36 % annually, which is quite high, if compared to other bank loans. If we are late even for 1 day, the bank do not take interest for one day, rather they charge interest for 45 days. If not used properly, credit card will get us in big trouble. However, it is boon if used properly.
With a credit card, we have to buy the things whose money we have with us. If we buy the product thinking that we will becomes rich later, then it will create a lot of trouble. As future is unexpected. When we buy products without thinking we get into Debt Trap.
Whenever we use the credit card, make sure to make the full payment. Do not get into the trap of paying minimum amount. In some cases, we should never use the credit card like :
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Petrol Pumps: they charge around 1% services fee and 7.2% GST. In some case services fee can get refundable, but you have to bear the GST cost.
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Never make payment while booking train tickets through credit card in India. The charge 1-2% extra, which will add extra burden
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Never use the credit card to add money to any digital payment wallet. The user has to pay 2-3% fee plus certain GST charges.
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Never withdraw Cash from Credit card else we get into a complicated debt trap.
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Never pay from one credit to another. Avoid the balance transfer. It will call for additional interest fee and processing fee.
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Never use credit card to pay insurance premium. They charge 1 - 1.5 % additionally
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Credit card bills should not be paid by cheque and cash. In that too we have to pay some extra charges.
At the time of buying the credit card, we should be careful. There are certain points which a customer should take care while requesting for credit card the checks are :
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We should see, that what type of credit card we needed. For example we are using flight for once or twice in a year and we took the flight and lounge credit card. It will not benefit to us.
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If you love online shopping then look out for some integrated credit card. So that when you do the shopping you will get the benefit.
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Review the late payment charges charged by different banks highest penalty charges should be avoided.
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One should also compare the interest rate.
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We also must compare the credit card annual fee and the hidden clauses there on. Either it should be very less or it should not be. Some bank offers you saying that it is free card, and some waive off fee for first year, but later they start charging. We have to make note of all this too.
Avoid the Minimum Payment option
People who are already caught in the credit card web, and making minimum payment every month they are just surviving. The credit card will never run out by paying the minimum amount. They keep paying money but it will never end. Because it charges higher interest. The bank charges around 36% annually. If we want to get rid of it then the only solution is to either borrow money from friends or relative and pay it or take some personal loan. A personal loan can easily be available at a lower rate of 14-15% which is far lessor than 36%. At least, the time for which we have taken the personal loan it will comes to end. Because by paying the minimum payment on credit card it will never end. If you have multiple loan with you make sure to end the credit card first because the interest on credit card is much higher than any loans.
In India it is always been said that the happiest person is one who does not have any debt. The more you avoid taking credit card the more helpful it is for you. Hope the article is meaningful and highlight the dark world of Credit Card.
Peace!!
Namaste @steemflow
Posted Using LeoFinance Alpha
