3 simple ways to escape credit card debt traps
Is your debt burden growing heavier and heavier because of your credit card bills?
Credit cards can be a double edged sword. It takes you into the luxurious world where you can spend the money you never owned. However at the end of the month, you are expected to pay for your splurging with exorbitant charges.
The worst part is that if you are unable to pay off the bill, the credit card company gives you the option of securing another credit card, taking fresh loan, converting dues into EMIs or liquidating investments to pay for the existing credit card. So, instead of solving the debt crisis, these steps take you deeper into the vicious debt cycle.
However donÔÇÖt worry. We have three tips handy that will help save you from credit card debts.
Avoid minimum payment
When you run short of cash, the option of making a minimum payment certainly sounds tempting. But you have to remember that this minimum bill payment is only a seemingly temporary relief. Infact it prolongs your repayment period, and unless youÔÇÖre using a credit card with 0% Annual Percentage Rate (APR), you are very likely to pay more money over the extended repayment time. Also high outstanding credit card balances can badly damage your credit score. So always pay the credit card bill in full.
Never miss a payment date
If you do not pay your credit card bills on or before the designated due date, you will have to deal with high late payment penalties. Remember that if the payment date falls on a public holiday, you should ensure you pay well before the date. In case you miss the payment day, immediately notify your credit card company and never wait until the next monthÔÇÖs due date to make up for the missed payment. This too will damage your credit rating.
Refrain from cash withdrawal
Credit card cash withdrawals or advances garner exorbitant charges from the service provider. This is a serious debt trap you must avoid. If you still need to withdraw cash, use multi currency travel cards that have no or very less ATM withdrawal charges.
You must use credit cards only if you are comfortable repaying the whole amount at the end of the billing cycle. Or else you must use prepaid multipurpose cards that have all the features of credit card but without inflated charges.