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People debate about the advantages and
disadvantages of carrying a credit card. Does credit card bring more
harm; since people frequently relate bankruptcy to credit card abuse?
Or it brings more good; since it is recognized worldwide? The answer to
these questions is how do you manage your credit card. It's that
simple. Here are tips on how you can manage your credit card well.
Always have this concept in mind:
if
you can't pay it in cash, you can't afford it. The common mistake made
by most credit card holders who fall into debt trap of credit card is,
they do not think twice while making a purchase. In most cases, the
"want" factor dominates the "need" factor when people purchase
something. To avoid this, ask yourself 2 simple questions: "Do I really
need it?", "Can I afford it now?" If either answer is a "no", leave the
item behind.
Credit card debt can be reduced to
minimum if we can pay back on time. Do not pay after the payment due
date. The consequences of not being able to pay on time are, you are
going to be slapped with hefty penalties. High late charges will be
imposed on you. On top of that, the residue amount will be charged with
high interest as well. The interest is normally of daily rest.
The other area which concerns you is
the interest rate charged on the balance amount which you can't pay off
in full. Some people may not know the credit card interest rates are
the highest among all types of credit facilities. Normally the interest
charged is on monthly basis, so some people may not see the
significance of it. If you multiply it by 12 months, you will see how
high the interest rates are. Moreover, by simply multiply, it will only
get you to the nominal rate. And the effective rate is always higher.
Keep only one card for emergencies.
One card is enough. Two cards are more than enough. Reducing the number
of cards owned will reduce the chances of overspending. Usually, one of
the factors the bank use to assign you the credit line is by evaluating
your ability to pay back. So, the credit line in your credit card is
normally the one you are comfortable to pay back with. Hence, one is
enough. Of course, there are some exceptions. For instance, if you need
to travel a lot on your business trip, you may have to have more than
one card to pay for your air tickets, lodging and food. In this case,
the company will help you to pay back and you do not have to worry
about that.
If your credit card debt makes you
breathless, think of an alternative to offset it. Balance transfer is
one of the better options. Interest charged for the amount transferred
is usually much lower compare to ordinary credit card interest. This is
going to help reducing your burden. Only transfer the amount you are
comfortable to pay back monthly. Balance transfer should be the
temporary solution. The best way to solve the credit card debt to the
root is still controlling your spending.
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