The crippling debt of credit card debts

                            

Credit card debt is like bringing back inflation. While using your credit card wisely can help you to build your credit score, misusing your credit cards can actually hurt your credit!!! The young generation has most fallen into the credit card trap. When you spend with cash, you are able to physically see exactly how much you’re spending. When you spend with credit, it's easy to overspend because no money actually changes hands, and you don't really feel the effects of spending. With several cards in pockets and not paying bills on time creates the main source of a problem. Most Indians fall into a debt trap without even realizing it. After not paying for months, credit debts seem inexplicably larger than the previous month.

You are a young professional with money to spend. You have several credit cards. You pamper your partner with an impressive buying spree. When the bills start arriving, you scramble to pay them before due dates. Month after month, your balances inexplicably seem larger than last months. This is the scenario that confronts many Indians. Credit card usage is relatively new to the vast majority of Indians. Higher disposable incomes have introduced credit cards to more people.

Buy now, pay later - a bait all of us have been lured by sometime or the other. Even more exciting are shopping schemes that allow you to pay in EMIs that are 10 times lower than the MRP of the product you buy. These schemes make our shopping trips easy, but there is a point where they tip from convenience to compulsion. 

So, the next time you see an easy loan deal, think twice. Things that look too good to be true are often just that. You must have heard of the quote “Rather go to bed supper less than rising is debt”, by Sir Benjamin Franklin. This famous quote just gives an indication of the extent of troubles that one might invite, if the debt is not managed properly. A squeaky clean borrowing record has become important today as CIBIL, the credit bureau tracks all loan defaults and delays and each such episode will damage your credit score and hamper your opportunities to get loans and other financial assistance from banks. If you are not disciplined, the new loan will only add to your problems instead of solving them. The loan against property will provide a lot of liquidity, but if the money is used to buy a new car or go on a holiday, you will be digging a deeper hole for yourself.

 Debt traps caused by credit card overspend happen because of the ‘minimum due’ each month. With the economic boom, the rising middle class flocked to credit cards. But in the past six months, credit card default has risen between 50 and 70 percent. As concern about student debt rises, promotional relationships between schools and banks have sounded alarm bells. You may have come through this before but it does not get simpler than this. Follow a simple exercise for a month- track ALL your expenses. Note it down on your phone or at home. When you do this, you will realize where your money is going. Then curtail on the things that you don’t need. Be smart! Don’t let this creeping debt cripple you!

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