A key role in our lives, credit cards are a panacea for all financial-related problems.
Yes, you got it right.
Credit cards are useful financial tools that increase convenience and aid in making regular purchases like our daily groceries, gas, electronics, and bill payments.
Although credit cards have many benefits that make life easier, they can also have drawbacks if they are not used properly. Fundamentally, we must comprehend the finest ways to use credit cards to get the most out of them. To do this, we must comprehend the negative effects of improper credit card use.
Let’s discuss the disadvantages of the credit cards
Hidden Charges: We need to be aware of all the fees that credit cards include. It isn’t always the charges; we are aware of them, but there may also be other fees that are not immediately visible when you first glance at the item. These fees are referred to as “Hidden Charges.” While using a credit card might appear to be simple, there are additional fees that could make things much more difficult. Before giving your consent for credit card approval, one should get an explanation of all costs.
Minimum Debt trap: If used unwisely, a credit card can cause a circumstance in which paying back the amount used by the credit card becomes difficult to pay to cause a financial problem, which is beyond any corrections known as a ‘debt trap”.
To avoid falling into a debt trap, you need to avoid paying the minimum amount due. If all you do is make the minimum payment on your Plastic Money bills, you won’t be getting out of debt. The Plastic Money firms are using this as a ruse to extort you with exorbitant interest rates on your unpaid payments.
Many people who use Plastic Money are led astray into thinking that the minimum payment is the full amount due when in reality this is merely a small portion of your unpaid obligations. As a result, owners of Plastic Money were required to pay interest on the outstanding balance, which can quickly balloon into a mountain of debt that is difficult for owners of Plastic Money to repay. They owe more as a result, which raises their financial burden and at times becomes difficult to handle. So, pay attention.
Missing Payment: Pay attention. Never skip a credit card payment. You’ll have to pay a hefty penalty as a late payment charge and making a repeated late payment charge will significantly reduce your credit score and the credit limit. Your credit score can harm your credit rating adversely impacting your future credit opportunities. Subsequently, missing payments could make it more difficult for you to get future loans because your ability to use plastic money is heavily reliant on your payment history.
Convenience Shopping: If you are a compulsive shopper, using Plastic Money may be alluring. Some people who use Plastic Money could make unneeded purchases because they know they’ll have to pay for them later, increasing their debt load and making it harder to pay. Such compulsive purchasing creates a trap that hurts compulsive purchasers. So, ensure before falling into convenience shopping, you are aware of the future consequences. So, stay in control of your undesired shopping.
High-Interest Rates: It’s critical to pay your bills on time. Missing payments on time will result in the balance being carried forward and interest being added. After the interest-free period has passed, this interest builds up on purchases made after that point. Plastic Money interest rates are generally high, averaging 3% per month, or 36% annually. To use your credit card responsibly, be sure to pay your bills on time.
Credit damage: Missed payments on Plastic Money and unpaid debts are listed in your credit record, which lowers your credit limit and makes it harder for you to receive loans in the future. There are always unforeseen future events. Therefore, to utilise our cards wisely and prevent future issues, we must comprehend the significance of credit building.
Surcharges on Plastic Money: Some retailers have been observed adding 2% to Plastic Money when paying for specific goods like electronics, gold jewellery, and many other items. Although the surcharges on Plastic Money are unjustified, they do exist in a lot of places.
Annual Fee: The majority of the cards have a fee that must be paid yearly. There are credit cards available that don’t have an annual fee, but they offer fewer benefits than those that do. You must consider your credit history and the necessary conditions before selecting a card. Even cards that have an annual fee may cancel if you ask them to or if you make the required minimum purchase. So be aware of your requirements and select your credit card accordingly.
Plastic Money Fraud: Although it’s not very prevalent, there’s a potential that you’ve fallen victim to a plastic money scam. Since personal information may now be accessed through card cloning, it is now possible for someone else or an organisation to use your card to make purchases thanks to technical improvements. If you think there have been any odd purchases on your statements, check them out and contact your bank immediately once. Banks typically waive fees if the fraud is confirmed, so you won’t be responsible for the thief’s purchases. Numerous fraud schemes target plastic money. Fighting Plastic Money fraud can be time-consuming and stressful, even when fraudulent transactions on your account might be reimbursed.
Limited Cash Withdrawals: Credit cards come with the unusual drawback of cash withdrawals. There is a huge charge on cash withdrawals from credit cards. While this is not the case with debit cards, credit cards charge an unusual fee ranging from 2.5% to 3% of the transaction amount, with a minimum of Rs 250 to Rs 500, and are shown on the billing statement. So, unless it’s really necessary, never withdraw cash.