The dangers of credit card and how to avoid?

The dangers of credit card and how to avoid?

A credit card is likely threatening for the new users of the credit cards. New users get attracted to credit cards mainly for the allure of what looks like free money. Everyone knows that it's not in reality, but people get fascinated by the promotions and get tangled among the web of credit cards and their offers. Whatever may be your plan either to get a new credit card or to drop the card you are already holding, its always recommended to inquire and understand about the credit card and avoid falling into overspending. By knowing complete information of the credit cards, it will help you develop healthy habits of using the credit cards and also help you to not to fall into the traps of the credit cards.

The Temptations to Overspend

Research shows that buyers pay off more when they are spending through credit cards than while paying in cash. In many cases, it has been observed that consumers willing to pay more via the credit card than when they buy in cash. Although there is a credit limit on your card which is always higher than the liquid cash you have in hand, there is no limit controlling your desire, during purchase, the credit card seduces to go for the almost unlimited purchases. Also one will not feel that pain while paying by card, but they feel insecure while paying in cash, as one can feel the cash going out of your pocket. But when it comes to the card, the consumer doesn't feel any insecurity and goes ahead with buying, this maybe looks like the credit card amount indebtedness.

How to avoid it

  • Newer go beyond your credit card limit.
  • To impress others, do not go for overspending to showoff the lifestyle which you cannot afford.
  • Set spending limits on your card personally.
  • Cutoff unnecessary purchase, do not get into the seduction which looks like free money of your plastic cadr, remember you have to clear your spending (money) at last.

What makes it harder to pay off the balance? 'Interest'

Interest on the balance makes it challenging to pay off the balance of the card. If the consumers are clearing the balance in time, it won't be that hard for the cardholder to clear the card amount. If the cardholder not paying the balance amount in time it leads to adding on interest. An increase in interest raises the balance on the card to be cleared.

How to avoid it

  • Pay your credit card balance in full each month = Zero Interest.
  • Paying credit card balance in time will not add any fines.
  • But in cases when you couldn't pay full, but try to pay off as much as you can this will help you to get minimal interests.

Risk of Getting into Debt

"Borrowing Money = Creating Debt", whenever you borrow money, there is a debt on you, the more you borrow the more you will get into the trap of debt. Debt causes many issues like stress, many other health issues. Once a person is drowned in debt reaching their other financial goals becomes harder, because of debts, there will be no savins, no other fun in life. To clear the debt one has to b do the job which not willing, you will still continue doing it because to clear your debt.

How to avoid debt

  • Not paying off the balance in time is the main sign of your debt as this will add on interest on your balance.
  • Try to pay off the balance in time, if not try to stop the usage of credit cards, and try to live within your own means this will help you not to get into the trap of debt.

Risk of ruining your credit score

The credit card score has a great impact on your credit profile. Wisely use the credit card to maintain the score. The credit card score will be maintained when you pay off the balance in time each month. If you fail or skip to pay off the balance the credit score will fall down. The more the credit falls down you will be in more trouble.

How to avoid it

  • Pay the balance each month in time, this will build and protect your score.
  • Always keep your card balance below 30% of the credit limit.
  • Minimize the applications of credit card usage.

A false sense of security allured by minimum payments

Many card issuers want the cardholder to pay off minimum balances payments each month to avoid late fees and also to maintain the account in a good state. But actually, this scenario works work for the card issuer as the minimum balance payments will simultaneously add interest which makes you pay more than the original balance. The minimum payments give you a false image of security, the reality is you are paying more and spending more time on clearance of this debt.

How to avoid it

  • Get rid of your balance payoff and minimize the amount of interest you pay overall.
  • Paying off the balance in full is an ideal to not get in any debt.
  • When you are not able to clear the balance in full, try to pay as much as you can, at least this will help you get less or minimum interest.
  • Never ever forget that paying off as soon as your balance will help you not to pay more than you spend.
  • If you delay in clearing balance it will add the interest on your balance which will make you pay more than you spent overall.

Confusing terms and conditions of the credit card

Term and conditions of the credit card are clear nowadays, this has made easy by the Credit CARD Act-.2009. Though these terms are very clear a little bit confusing. This confusion leads to many serious consequences. So it's very important to understand the terms and conditions if you are not clear about the terms you have to face consequences like interest rates or hit the credit score for your card.

How to avoid it

  • Understand your interest rates and balance rate types that apply to your card.
  • Clarify your queries with the card customer care and try to make the best of your card.

Multiple credit cards makes it harder to track your spendings

For a healthy financial life, it is necessary to keep track of your spendings. But this makes it difficult for the usage of multiple cards. When you have more options for spending obviously you will go for more luxuries, but forget that this spending leads to debts. When you have multiple cards you have more options to spend, but at the same time, you are gaining depts on multiple cards because of overspending.

How to avoid it

  • Track your spendings either manually or by finance software.

Rist of credit card frauds

Everyone is a victim of credit card fraud once in a while in their lifetime. You may lose your card, or someone might have stolen your credit card info from here you have purchased the card. But you are on a safe hand with the liability for "fraudulent credit card purchase" but one has to report these charges ASAP.

How to avoid it

  • Often monitor your credit card.
  • Report quickly to the credit card shop as soon as you notice you are missing your card.
  • Report suspicious charges on time.