Financial institutions issue credit cards to their customers. It allows them to borrow funds with which they can buy goods and services. But sometimes, the borrowers go above their re-payments capacity and attract high-interest recovery from lenders. We shall try to pinpoint the impacts of credit card debt.
- Don’t buy anything beyond your capacity
A borrower can meet the emergency need, and still not be required to pay any interest if she/he can pay the monthly installment when he/she gets the monthly bill from the lender. Credit cards should always be restricted to a payment option and not as a revolving instrument of debt. - Know when the short-term loan is worth taking
Sometimes, it is prudent to buy some family emergency requirement and repay the entire loan against a credit card within a short period. Here, you do not have to pay interest for that loan amount. It is smart buying. - Repaying of this loan is often very hard
If you do not care about the debt burden you are accumulating against the credit card, you may pay large interest payments. Repayment becomes very difficult with the compounding interest, and you may feel the impacts of credit card debt. - High debt can affect your credit score
If your outstanding debt amount gets increased and you fail to pay a monthly payment of the bills, due to non-availability funds in your bank account, it may severely affect your credit score. If it starts affecting your credit score, you will not be able to get another loan for any emergency. Keep your account balance under 30% of your available credit balance without which you may have to grin and bear the impacts of a credit card debt. - Take advice from a financial consultant
If you are in high debt and cannot manage your finances to pay the monthly installment, please seek professional financial consultants to help you tide over your financial hassles. - You should pay a lump sum if possible
If you are looking to reduce your debt burden, you can request your creditors to accept a lump sum amount. If they agree, you save yourself from getting into legal wrangles for non-payment of loans. - Non-payment can mean several things
You will not necessarily be put behind bars, but there are other repercussions of the same. A creditor may sue you and take away your salary. You can save yourself from such an eventuality by taking care of your expenditure and your earning.
A credit card can help you in the hour of emergency. But borrowers go beyond their capacity and find themselves in a debt trap. Follow the tips mentioned here to avoid the impacts of credit card debts.
