Credit cards are a combination of power and risk. They give you control over your life and expenses. However, if you aren’t careful about using your card, you are likely to end up in debt. Having debt could ruin your whole lifestyle, financial goals and might damage your credit scores too.
It is better to avoid debt as the credit card interest rate isn’t low that you can ignore it. There are various other factors like late fees and overdue, adding up to this interest. Together, they become unmanageable, leaving you behind in debt. However, these debts can be avoided as long as you are careful about your expenses and payments.
Pay more than required
Whenever you apply for credit card online or offline, you’ll be told the minimum limit to be paid off every month. However, it is best to pay more than this limit. Say you owe Rs. 10,000 on the card and your credit provider might allow modest minimum repayment of maybe Rs. 1000 or so. Paying this amount alone will pile up balances and add hundreds to it as interest.
Consider you haven’t used the card since then but are paying only the minimum amount every month. How long will it take you to repay the whole thing? Do you know the extra you are paying off for it? That isn’t small. So, try paying as much as you can instead of just sticking to the minimum limits.
Maintain the payment track
Paying more than the minimum isn’t sufficient alone. You need to make the payments on time. Try not to miss any payment at any cost, as it can lead to you paying extra. For example, you’ve skipped a month’s payment. It adds up to the next slot with additional charges for the late fee. If you repeat it frequently while using the card for your expenses, it’ll add up to your debt. It could lead to a situation where you’re clueless about how to repay. So, make timely payments and be on that track.
Know your affordability
If you are trying to purchase anything which you cannot afford in cash, better don’t. It is an easy way to understand your affordability. You need to be very conscious while shopping, as there will be many things that can tempt you to buy them. However, try buying only those for whom you can pay the cash, i.e., the ones you can afford. It is fine that you sometimes buy or shop out of your affordability range but, make sure you don’t do that too often.
Don’t leave your card with someone
This is one place where most people cannot do anything. If a trusted friend comes and asks for a credit card, it might be hard to say a no. However, keep in mind that as soon as your card is in someone else’s hands, you will not have control over the spending limit. Instead, the other person gets to choose the limits. In case he/she isn’t able to pay the balance on time, it’ll obviously fall on you. There are cases where they can make unexpected payments and the bill comes to you. So, better don’t let anyone else use your cards. If that isn’t possible, ensure that you collect the spent amount on time.
Avoid balance transfers
People generally transfer the balance from a credit card with a high interest rate to a card with a lower one. This is a smart move but, it can backfire too. The transfer charges add to the bill and if you do it repeatedly, you might end up in debt. Transferring balances without paying them off leads to constantly increasing balances. Interests, late fees, transfer fees, etc., add to that, making the situation worse. Unless there is a huge difference or profit, avoid transferring the balances.
Recognize the signs
There is a point where you can clearly understand that you are on the edge of a credit card debt. For example, if a month’s balance is too high to be paid in full at once, understand that your expenses are off the track. It is an early warning sign telling you that you need to pull back on your spending habits. Try not to use the card until you clear the dues completely so that you can stop making the situation worse.
Credit cards are introduced to ease your convenience. Using them without control can be a nightmare later on. Whether you apply for best credit cards in India online or offline, be aware of its terms, limits, and features. Knowing these can help use the cards better while getting the most out of them.
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