• Why Get a Credit Card and How to Keep Yourself Debt Free


    There is always this persistent hue and cry about how credit cards are a dangerous phenomenon and how they can force you to nosedive into torrential debt. It sure is an accepted fact that credit cards can be dangerous and can lead to overburdening debt. However, while such is the case, the credit card user is mostly to blame. The exposure to credit and thirst for wants which are at touching distance has resulted in exploitation of credit and giving rise to unfavourable levels of debt. In this article, we examine a slightly different take on things. We look at how credit cards aren’t really a dangerous phenomenon and look at how they can work to benefit you. Talking of benefits, they can range from raising your standard of living to conveniently satisfying your wants without actually sullying your financial stability.

    Here is why you should actually get a credit card

    The fast paced world of technological advancement has given rise to attractive services, products and commodities. Starting from sophisticated and expensive gadgets to the luxury vacations, there is more than what money can buy. It is only natural that we angle various aspects of our life   (mostly finances) to acquire what is made available. Talking of this, credit cards are a wonderful idea. Here is what they give you:

    • The satisfaction of getting what you want almost immediately without having to immediately pay entirely for it.
    • The flexibility to convert purchases to easy monthly payments.
    • The opportunity to purchase costly, sophisticated gadgets.
    • The opportunity to plan your dream vacation without actually having the resources to pay for it in full.

    Besides the above mentioned obvious offerings, there’s more to credit cards:

    • Reward points that can be accumulated on purchases and redeemed for exciting offers and discounts at popular places across the world.
    • Cashbacks on purchases which literally mean you get discounts on every purchase you make using your credit card.
    • The possibility to make minimum monthly payments and not having to pay your bills in full. Minimum payments are usually just 3% of the monthly outstanding balance. They have to be paid before the due date or a certain fee termed as the late payment fee will be imposed.
    • Interest free periods lasting up to 2 or three weeks to pay off your bills.
    • A credit limit of almost three times your income.

    Well, considering these aspects of credit cards, one can fairly conclude that credit cards are a serious blessing. However, coming back the point made earlier, they can very well land you in a debt limbo if their usage isn’t controlled.

    An important fact that needs to be considered is the annual interest charges. On all purchases you make, an interest is levied. The interests are usually levied on a monthly basis with the interest of all months in a calendar year adding up to about 25-28%. This value can be more because technically, you are charged an interest on purchases right from day one. Interests are levied on unpaid amounts after the first interest free period. The interest free period is usually two or three weeks from the release of the statement. Also, in order to avoid paying interest on your purchases, the entire amount has to be paid in full before the due date.

    Credit cards also let you apply for supplementary cards that you can give to your children/parents/spouse. The expenditure on supplementary cards can be tracked at all times and the bills of all cards under a credit account are delivered in a single statement. Banks usually allow you to apply for three or four supplementary cards.

    Let us now try and answer the conundrum that baffles a majority of credit card users.

    So how do you keep yourself out of debt?

    This is perhaps a question that every credit card user has. How does one keep himself/herself out of debt? Well, let us answer that.

    Debt is basically an illusion and whether you believe it or not, the whole world is in debt – in some form or the other. Governments, institutions, individuals – everyone is in debt. So the fact that you are in debt isn’t really a big deal, is it? But what level of debt is considered safe? Simply thrusting yourself into debt through mindless spending is going to land you in serious misery. So let us come to the bottom line - how to keep your finances afloat through prudent credit card usage? Here are some points you can consider. Implementing these is the key to maintaining your debt levels.

    • Spend not more than 30-40% of your monthly income in a given month. Keeping it at 20% will be even better.
    • If you have multiple credit cards, use them sparingly.
    • Make sure you don’t delay your payments. This will help you avoid late payment fees and interest on unpaid payments.
    • Pay more than the minimum payment for a given month - at least two or three times the minimum payment.
    • Avoid exceeding the credit limit. This will avoid additional interest charges and overlimit fees.
    • Refrain from cash withdrawals. Withdrawals attract huge interest rates and using your credit card to perform cash withdrawals is sure to plummet you into merciless debt levels.
    • Try and use just one-third of your credit limit - this is certain to keep a tight control over your debt.

    By following these simple yet difficult-to-implement steps, you can alter the general perception about how credit cards are a bane. Using them effectively wlll bring you three times the quantum of benefits than misery.

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