7 Reasons To Say ‘No’ to Credit Cards
Out of cash? Use a credit card.
Stuck in an emergency? Use a credit card.
Credit cards are perhaps the most eligible competitors for the position of ‘man’s best friends’ after dogs!
Seriously, a credit card is known to be a tool which helps one sail through hardships and emergencies smoothly.
But, what is yet to be pondered upon is that whether this reason is enough for us to adopt and use a credit card extensively?
I know there are numerous other benefits of credit cards as well. Credit cards come up with offers and lucrative deals on hotel and flight bookings, provide incentives such as significant cashbacks and also provide you with credit interest-free for a fixed period of time without any collateral.
Wonderful, I must say!
Also, credit cards lend you the ability to build your credit score.
But have you, at any point of time, considered that if a single credit card has the ability to build your credit score, it also has the ability to destroy it forever?
Apart from this, do you know crores of people around the globe succumb to debt traps because of credit cards every year?
Don’t believe me? Read about an incident that happened in Delhi, India a week ago: Unable to pay credit card bills, man jumps to his death
Because credit cards follow a basic principle: Spend now and pay later.
This policy of credit cards makes people spend more than what they can really afford. But why would people do that? To maintain their ‘social status’ in society.
Now, another thing most people wonder is that what is the problem in spending now and paying later?
Well, there is nothing really ‘wrong’ in it, well not until you make it a habit.
People usually tend to get stuck in this debt trap when they start spending more than what they can possibly pay later. It takes years and years, even decades, to repay credit card dues.
People often tend to pay the minimum required amount and then take on more and more debt.
I hope I have convinced you enough to not use credit cards! But for a more detailed approach, let’s explore 7 reasons to say no to credit cards in detail:
1. Credit Card Interest Rates Are Surprisingly High
Credit cards usually have surprisingly high interest rates which start to imply after a certain grace period. People like us are not aware of these interest rates and hence continue borrowing without a pay-back plan.
In fact, interest rates also grow with time and can rise to such a high level that your interest becomes higher than your initial loan amount.
The best way to avoid this kind of a situation is to avoid buying exorbitant things which you can’t otherwise afford with cash.
2. Credit Cards Lead To Overspending
Credit cards have been designed very smartly. Their concept is designed in a way which makes people overspend than their budgets.
This will lead to people paying interest rates and ultimately the credit card companies’ profits!
But why do people overspend?
Well, purchasing an item simply doesn’t appear as huge a deal if you simply need to swipe a plastic card and don’t have to worry about its payment for a month at least.
However, if you pay with actual money, you can physically feel the paper money leaving your hand. This makes you more mindful of your expenses.
3. You May Get Stuck In A Debt-Trap
If you go on a spending spree with your credit card without a proper pay-back plan in place, you may be digging your own grave.
Debt trap is the worst thing that can happen to anyone financially. It eats you away physically, mentally and financially.
I know what you must be thinking: “this won’t happen to me!”
Well, you are wrong my dear friend.
Anyone, I repeat, anyone can get into a debt trap if he/she is an avid user of credit cards.
4. Concealed Terms & Conditions
Have you ever considered reading the terms and conditions when signing up for a credit card?
I must tell you that you should.
I know the terms and conditions are written in a very small type but trust me, they are worth reading.
When you will actually read these terms and conditions, you will literally be shocked by the number of things that were being kept in the dark from you by the company.
This little fine print will uncover some unknown facts and policies related to your dear credit card.
5. Credit Cards Can Ruin Your Credit Score
If you fail to repay your credit card dues continuously, your credit score will start to diminish. And, as I am sure you would know, having a good credit score is extremely important.
If your credit score goes down, you’ll notice your insurance premium will go up. This is because some insurance companies check credit scores while calculating each individual’s premium, and when they’ll see that you have failed to pay the dues of your credit card, they’ll charge higher from you since you’re an irresponsible person in their eyes.
Also, that’s not it. A poor credit score is like a seed for a tree of financial problems.
Some companies check the credit scores of applicants before hiring them for a job. If and when you apply for a home loan, there are chances that you are required to pay a high interest, or worse, you’ll be denied the loan citing your low credit score.
6. Risk Of Ruining Relationships
Using a credit card can really ruin relationships!
Couples tend to fight over many topics, but the money topic tops that list. What if your partner is a spendthrift and therefore often ends up overspending, whereas you are a saver?
To avoid silly fights (that can soon turn into serious arguments), it is better to set up a budget and spending plan and avoid disturbances like a credit card.
7. Credit Cards Rob You Of Mental Peace
Answer me honestly: are you at peace when you know that you owe your friend money for that movie night?
Well, think of the mental peace which comes when you don’t have to worry about any interest rates, penalties, dues, credit card bills etc.
One word: Priceless!
Trust me; this mental peace will give you a much greater satisfaction than whatever product you purchase through borrowing money.
Therefore, instead of borrowing through a credit card and losing sleep over it, make a wish list of your favorite items and buy them when you can really afford them.
It will be worth the wait!
In conclusion, while credit cards may prove to be your best friends in times of an emergency, they can very similarly turn into your worst enemies if used recklessly.
Therefore, you must say no to credit and use a card only when it is absolutely necessary.
Start saving each month and you’ll soon discover that you have enough funds for buying that ‘wish list item’ of yours! Also, this way you won’t have to worry about debt when you retire.
The comfort and advantages offered by credit cards make them amazing, but think about their downside as well before using.
Dishika is a personal finance blogger at Bachat. With her articles, she breaks down complex financial concepts into bite-sized articles that are fun to read and easy to understand. Bachat is a one-of-its-kind mobile app that helps you save money on autopilot.
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