There is no doubt that credit cards make it easy for us to make the payments when we are out of money. But getting your credit card into overwhelming debt is also not expected in any case. You may have seen the credit card customers who use them on regular basis and never pay a penny in any form of fee. You must be wondering that how it is possible. If it is the case, then we would like to tell you some facts that you must know about the credit card debts.
- Having a credit card does not mean that you have to owe
Many of you will be surprised to know that you can remain out of debt even after using your credit card regularly. Yes, it is possible and for that you are required to use it as a payment device, not as a debt instrument. Having a credit card does not mean that you have to remain in debt always. And you just need to track your cash flow in order to make it work.
- Short term credit card loans make a sense, but not in all the situations
Sometimes it is beneficial to finance the purchase with your credit card and it is only in the case when the repayment period is short. For an instance, compare the total interest amount for 4 month repayment tenure with that of 4 years’. This will let you know the difference.
- Repaying the credit card debt is hard than owing it
There is no doubt that sinking into an overwhelming debt is extremely easy, but you are going to face the trouble while repaying it. It is because of the reason that the interest compounds and payments are increased with an increase in the balance.
- Credit score is affected by the debt
Holding a large amount of debt is not only going to put you in trouble, but the large amount of balance will also have a negative impact on your credit score. In order to have a high credit score, your account balance should be less than 35% of your credit card limit. Making timely payments is also necessary to keep your credit score high.
- Create a plan for repayments
As mentioned above, repayments are not easy; so you are required to plan them. What you can do is limiting your expenses, getting the interest rates reduced and prioritizing the payments according to the interest rates.