Pitfalls of Credit Card Debt You Must Be Aware Of

If you have your own credit card, you will enjoy going to shopping malls frequently and buying several things with it. With credit cards in your wallet, you do not have to keep liquid cash with you. This makes your shopping a better one. You should make it a point to pay down the card balance on time once your requirement with the plastic money is over. Failing to repay the outstanding dues on time will incur enormous debt burden unnecessarily. You will then have to look for suitable ways for the settlement of credit card debt so that you can become debt free soon. There are definitely several advantages of having your own plastic money. At the same time, there are various pitfalls too. Read on to know about some disadvantages of having plastic money.

  • Tendency to spend beyond your means – Most people consider credit cards as additional money that they have in their hands. With credit cards, you feel you’ve higher spending capability and thus, a tendency to spend beyond your means. If you think this way, it will destroy your budget definitely. The maximum limit of your card does not mean you have that much money in hand. Credit cards are basically loans that you use during emergencies. As such, you should pay them off on time in order to avoid falling into debt problems.

  • Pay high rate of interest on the outstanding bills – When you swipe the credit cards to make any purchase, you should make it a point to repay the card balance on time. Most companies do not require you to repay the balance every month. However, when you delay in making the payments, you’ll be charged high interest rate on your dues. The more you miss out the monthly payments, the higher interest rate you’ll be charged in the long run. As such, try to pay off all your dues at the shortest time possible.

  • High chance of fraud – Just like liquid cash, credit cards can be stolen too. As such, if your credit card number gets stolen in any way, you may have to face great trouble if you don’t take immediate action. Be careful while making payments with the credit cards online. You may be a sufferer of deceitful emails or websites. In case your credit card or number has been stolen, you must report it to the company at once so they can freeze your account completely. Thus, any kind of dealings done with your credit card will be considered invalid.

  • Bad credit rating – If you have the bad habit of using credit cards for every small purchase you make, it may damage your credit and your score may drop down by several points. With negative credit rating, you’ll find it difficult to apply for a mortgage loan. You need to know that the lenders will assess your credit score before approving any kind of loan request. As such, make sure you don’t miss out any payment if you want to take out loan in future.

  • Buying capacity gets hampered – Buying items with credit cards means using money from your future income. You get an advance with the help of your credit cards. Make it a point to pay off the credit card balance so as to avoid getting entrapped into debt burden. Besides this, you need to know when you use credit card for making each and every purchase, your buying capacity gets hampered and you, very much, become dependant on it.

Thus, though credit card has various advantages, they have drawbacks too. As such, be a smart and responsible credit card user so as to avoid getting into unnecessary difficulties.

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AuthorAndy Masaki

Andy Masaki is a financial writer associated with the Oak View Law Group. He is a debt expert and a member of several online forums where he shares his advices as well as tips to lead a financially independent life