Avoiding Credit Card Trap

One of the best modern inventions today is Credit Card, but it is also one of the most misused financial instruments which caused terrible hardship to many urbanites.  If you use credit card wisely, it offers safety, convenience and a bit of saving, but if you ever misused it, be prepared to face headache.

To avoid the mistakes of Credit Card usage, below are some tips you should be aware of:

1)      Not settling the full payment

The flexibility and option of settling your credit card statement with the minimal 5% is actually a trap to bigger liability.  By paying the minimum amount of 5%, you are allowing the credit card company to charge you finance charges of 1.5% per month.  If you continuous use your credit card and paying the minimal every month, you are accumulating debts with interest rate of 18% per year.

Make an attempt to settle your outstanding amount before using the card. 

2)      Using Credit Card as a Loan facility

Many people love the convenience of buying items without the need of having cash.  Thus, treating Credit Card as a loan facility.  This is dangerous because you may not have evaluate if you have the ability to service the loan.  Credit Card finance charges at 1.5% per month is very high compared to any secured loan.  It is indeed not wise to treat Credit Card as a loan instrument.

3)      Buying unnecessary items

One of the major reasons why many people fall into Credit Card trap is uncontrolled spending.  The convenience of swiping your card and carting purchases away is a simple action, but comes with heavy repercussion, especially if the items your purchased are non-essential.   

4)      Having too many cards

Do you really need that many cards?  Unless you are not treating all these cards as unsecured loan, you actually don’t need that many cards.  You may need one or two cards.  One card for your regular use for shopping, which you don’t have any outstanding amount, and maybe another cards for emergency uses.  Having many cards to help out paying for another card is a nightmare you must avoid, because it will turn out to be a financial black-hole where you can never finished settling.

Remember, all your credit cards facility and any outstanding debts are recorded and will have an impact to your credit standing.  It will hurt you when you are apply for housing loan or car loan in future.