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Failing to Plan is Planning to Fail

Updated on: 03 Jan 2024 // 4 min read // Credit Cards
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A Credit Card is a good servant, but a bad master. What does this statement signify? It states that you should use your Credit Cards wisely. It will help you build a positive credit history. But, if you start missing your payments, the debts can pile up very fast because the interest rate on a Credit Card is abnormally high. Let us see the pros and cons of using a Credit Card.

The Advantages of Using a Credit Card

  • It is handy in an emergency. You might not be able to access your funds at times. The Credit Card can help you save the day.
  • Handling a Credit Card well can help you establish a good credit history.
  • You can take advantage of the reward points and get cash back offers and discounts on various products.
  • Specific Credit Cards offer insurance on the purchases you make.
  • Your confidence levels will always be high when you have a valid Credit Card in your wallet.

The Disadvantages

There are no disadvantages in a Credit Card. It depends on how you use or misuse the card. If you do not know how to use the card or use it recklessly, you can fall into trouble.

  • Not paying your credit card dues on time can lead to a debt trap. The rate of interest on a Credit Card can go up to 42% per annum.
  • You enter a debt trap before you even realise the same.
  • Once you default on your Credit Card, your credit score can take a hit.
  • A missed card payment can stay for as long as seven years on the credit report even after you have cleared the payment subsequently.

How Do You Apply for the Top Credit Cards?

Access the website of MyMoneyMantra and Apply for Best Credit Card Offers Online. Let us look at the points you have to note when you apply for the Credit Cards. You should do your planning well, because the wise men always say, “Failing to plan is planning to fail.” Let us see how you can plan your Credit Cards well and ensure that you do not fail in any case.

  • Shop for the right card: If you are a frequent traveller, it is always better to opt for a card offering air miles as reward points. You can redeem these reward points and save a lot of money in your future airline and hotel bookings. Similarly, if you a compulsive shopper, go for the store Credit Cards. They can help you get instant discounts and cashback offers.
  • Opt for the credit cards that have the best interest rate: Credit Cards have different rates of interest. Do not opt for the first card that comes your way. Shop around for some time. You will land up with one that offers the best interest rate. Check out the interest-free period. Some cards give you interest-free periods as long as 52 days. Hence, you need a bit of planning while applying for Credit Cards. Check out the card issuance and renewal charges as well.
  • Ask these questions to your conscience before you use the Credit Card:
  1. Do I need to purchase the particular item?
  2. Can I afford to wait until I save some money?
  3. Will I be able to pay the bill in full when it arrives?
  4. If no, how long will it take to repay the loan?
  5. Under such circumstances, what will this item cost me?
  6. Is it worth buying at this price?

These are common questions, but they have a significant bearing on your credit card usage patterns.

  • Do not use all your available credit on the credit card: If you accidentally go over the limit, you might incur an additional fee. Secondly, credit bureaus pay a lot of attention to the proportion of unused credit in your Credit Card accounts. A healthy ratio is around 30%. Anything more than that can send the signal that your credit health is not sound enough.
  • Pay your entire card bills timely every month: The banks have facilities allowing you to pay a portion of your debt. They call it the ‘Minimum Amount Due.’ It is around 5% of the outstanding amount. Paying this amount can keep your card live. However, you should always insist on paying the bill in full. You save a lot of money by way of interest payments.
  • Having about two Credit Cards with you is fine: You will be able to manage them better. Having more can be risky as you tend to forget to make the payment on time. The higher the number of Credit Cards with you, the higher will be the temptation to buy things you do not need.

Thus, you see that you need a lot of planning while using a Credit Card. What will happen if you fail to do the planning?

  • You will land up with an expensive card on your hands.
  • Your defaults in payments can affect your credit score thereby making you ineligible to apply for new Credit Cards.
  • You interest component will increase thereby forcing you into a debt trap.

Also Read: Have You Read Your Credit Card Agreement Carefully?

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