How to Avoid Falling into the Credit Card Debt Trap?

January 31, 2024

Did you know the interest rate that credit card companies charge? It's roughly about 42% per annum. It is an insanely high.

Let me share an example of one person who had an outstanding bill of Rs 1,51,460 but somehow he missed Rs 60 and paid only Rs 1,51,400. In the next billing cycle, he was charged Financial charges of Rs 6349. Now he was shocked and being into banking he was able to do the reversal of the charges but think about it what if it was you or your family?

How these credit card companies work:

You can use credit cards either online or offline and they give you free credit from 20 to 50 days depending upon the card. Then they bill you for the purchases made and give you the due date before which you have to pay the total due or minimum due, In case you fail to pay by the due date there are 2 charges they levy one being the penalty and the other being the interest. And they will keep charging you interest for all the purchases thereafter until you clear the previous dues.

When you pay the minimum payment due then you have 2 benefits, you don't pay the penalty and your cibil score is not affected. But if you miss the payment you pay a penalty, pay interest and also your cibil score goes down.

Now are are few tips I would like to share which I personally use.

Have 3-4 different credit cards from different banks with different due dates

Make the full payment before the due date. You can set reminders or alarms in your mobile calendar. If full is not possible least make the minimum due to avoid penalty and a bad cibil score

Most importantly be mindful when you swipe your card. It's very important to know the difference between your needs and wants. You can swipe for your needs but when it's your want think twice before you swipe.

Hope this article was useful. Do like and share with one friend who uses credit cards.

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