If credit card is used wisely, it can be very useful for us. With this, you can pay electricity or water bill after the salary is over. But many times people start using credit card for wasteful expenditure. This poses a risk of getting trapped in debt, which can be difficult to get out of. Let us know the way to avoid this.
Many times after the salary is over, we need money for shopping or any other work. In such a situation, we use our credit card. Of course, it is very convenient to fulfill our small needs, but if it is not used wisely, it can also become a cause of trouble.
Let us know how credit card can trap us in the debt trap and what is the way to avoid it?
You may have to pay heavy interest
Credit card fulfills the immediate need of money, but if you are not able to pay the bill on time, then you may have to pay 30 percent or more interest. In such a situation, you may have to borrow from friends or relatives to pay the bill on time and then you will get trapped in the debt trap.
Stay away from the temptation of offers and discounts
Many times we see very tempting offers on e-commerce sites and we take out our credit card. But, we should keep in mind that spending from credit card is a loan. In such a situation, we should always spend according to our needs and should not get trapped in the trap of offers.
Do not take more than one credit card
Having more than one credit card becomes a problem of managing them. Sometimes it becomes difficult to pay the bill on time. Also, expenses like annual fees are also associated with it. Having more than one credit card can also lead to the addiction of wasteful expenditure.
In such a situation, before taking a credit card, you should ask yourself why you need a credit card and why your work cannot be done with one.
Credit score can also be bad
When we have a credit card in hand, we start spending blindly. But, we should spend only up to 30 percent of the limit. Spending more than this increases the credit utilization ratio. In simple words, it is a sign of being more dependent on loans. This has a bad effect on the credit score.
Withdrawing cash is a loss-making deal
Withdrawing cash from a credit card should be avoided. In this, apart from interest, you have to pay other charges as well, which can be 2.5 to 3 percent of the withdrawn cash.
You have to pay interest from the day of withdrawal. The bank can also charge a heavy charge for this, which is different for every bank.
Do not close the card suddenly
Many times, if people have two credit cards, they suddenly close one. But, this can increase the credit utilization ratio. This ratio was earlier divided between two cards, which will now depend on only one card. This also spoils the credit score.
