Credit card is one of the most convenient ways of making a payment in case of an emergency or when you don’t have enough cash in your pocket. This card doesn’t let you worry about your finances for sometime. However, before using your credit card, you must keep in mind that you will have to pay your debt off in time, else you might end up falling in a debt trap.
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According to a report by The Economic Times, this seems to be a rising problem in India, as for the first time in the country, credit card outstanding amount crossed the Rs 2 Lakh crore mark in April this year. This is a jump of over 30 per cent, compared to the same period last year and double the pace of growth of overall bank loans.
While some experts are of the opinion that such a condition have come up due to increased customer spending and inflation, others are of the opinion that some of it is also due to rollovers.
Getting out of debt First step is to rebalance your budget and cut down any unnecessary expenses and repay the credit card loans as early as possible as they are among the highest for any loans, ranging from 30-45 per cent a year.
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Beware of all the chargesCredit card bills must always be paid on time even if you are paying the minimum amount due as failing to pay even the minimum due amount in time will lead to late payment charge on the outstanding amount due on the card.
Many credit card users are of the opinion that paying the minimum amount will help in avoiding the high interest rates. However, the card issuer will charge 2-4 per cent not only on the outstanding amount, but also on new purchases. The MAD is inclusive of all applicable taxes, along with the EMI on EMI-based products and 5 per cent of the total outstanding amount. Any unpaid dues from previous statements will also be added to the current MAD to arrive at the total amount.
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Avoid unnecessary spending Keep a check on your card usage and limit your credit card spending in line with your income and always pay more than the minimum amount due in case you are unable to pay the entire amount in one go.
