A credit card is a handy and easy debt that you can get in a click. An amount of pre-approved loan is offered to you, which you can use to purchase or make any expense. It is an instrument when used well can build your creditworthiness. It helps you to make purchase endlessly till you reach your credit limit. A credit card is very tempting, as well as the best way to get into the debt trap. There is a lot of risk in using a credit card, as with every transaction you get into debt. If you are not being able to pay the credit card bills, you end up being harassed. Want to know why an instant personal loan is better than using a credit card? Get started!
How do credit cards work?
A credit card is the most expensive form of credit. It comes in the form of a card and has a pre-approved loan amount. You can use this credit limit to purchase anything when you are short of cash. There is a monthly billing cycle and you get a bill after the cycle is over. Once the billing statement is generated, you need to pay the due amount within a specified period. The credit card bill has two payment types, minimum bill and total outstanding amount. If you pay only the minimum, you fall into a debt trap.
What happens when you only pay the minimum?
- You will be trapped for a long period. Paying only a minimum amount will make you fall into the credit cycle for a long period.
- You end up paying more and more interest. If you are paying only the minimum amount, you will end up paying extra interest monthly.
- You will end up hurting your credit score and history. Late payment can be a major setback to your credit score and affect your credit health.
Avoid credit card debt
- Use a credit card only when it is necessary. Don’t go for luxury expenses using debt.
- Pay off your bills on time by planning your income source.
- Ask for help or go for a personal loan to pay off your credit card bills.
Wrapping up
A credit card is the most expensive form of debt. It is better to go for a personal loan calculator to take a loan and pay off all your credit card bills. Consolidate your debt and make your finances manageable.
