As the days go by, the spread of this pandemic has managed to pretty much skyrocket off the roof. This has led to major disruptions to the economy as people now face a huge cash crunch. Pay cuts and multiple layoffs have sparked fear into the minds of the common man. To curb this issue, those who had access to credit cards are now using it to meet their needs, but if it ain’t used strategically it will most likely take you down on a debt trap that would be quite difficult to bounce back from.
During an emergency such as the one we are in right now, credit cards can be a savior, but they also have drawbacks in the form of their costs, risks, and limitations. For starters, one can easily end up with high-interest debt, which can put the user in a whole lot more stress financially. Using a credit card can only keep you afloat for some time, but as the debt keeps rising with the high-interest rate, it eventually has to be paid back.
As a lack of income, loss of payment method, etc. keeps mounting, people look towards credit cards for handling monthly obligations like utility bills, paying rent, etc. and are opting for the additional credit period to return the amount. But if one repeatedly does the same, it will adversely impact their finances.
The debt created through credit cards is considered to be one of the most expensive due to their high-interest rates as compared to other instant loans. The unpaid balance on a credit card gets charged at a massive interest rate of around 36 to 48 percent per annum. And that’s not all, in case they are late in their repayment, an additional fine of around Rs 1,000 is levied on the customer, this late payment will also directly impact their credit score.
Thus, excessive usage of credit cards must be avoided to save yourselves the trouble in the future. Payment of monthly essential bills through credit cards can only gain you just about 45 days, after which you are facing an even larger amount. So, it’s best to find some alternatives like redeeming some existing investment or taking some loans from friends or family.
