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Why Are Millennials Falling Into The Credit Card Debt Trap?


We’ve all had to come across phrases like credit cards are pocket scoops, they encourage overspending, they invite debt traps etc., right? But have you ever wondered the reason for all these comments? It is unfair that although it is a great financial instrument that offers the double benefit of instant credit and money savings through cash backs, discounts, reward points, etc. , credit cards are still demonized by many.

Eager to know the reasons behind the tons of biased opinions or rumors that put credit cards in a bad light? Read on to learn about common mistakes that plunge credit card users into the debt trap.

1. Make impulse purchases just for offers

The secret to success for those who can manage their credit cards smartly is to stay disciplined in both usage and repayment, in addition to controlling the urge to spend on impulse. More often than not, the enticing offers and discounts offered by credit card issuers and merchant partners are the perfect bait for credit card users who lack financial discipline, as these people are likely to give in to the money. want to spend too much just for the sake of the deals. . Eventually, such cravings become the root cause of the fact that many people do not pay back all of their dues on time and gradually fall into the debt trap.


Read also : Worth explaining! The credit card is not a debt trap, here is how to use it correctly

2. Find the “easy” solution by reimbursing only the minimum amount due


The first thought that comes to the minds of many credit card users when they see their credit card bill spiked is to take the easy way out by paying the minimum amount owed. Seeing the relatively small amount as the minimum due (usually 5% of the invoice amount) seems a lot easier to pay than the huge total due, doesn’t it? This is where we are wrong. What we fail to understand is that while paying the minimum amount on the due date may save you from late payment charges, the high finance charge would still be taken from the full amount overdue. The worst part is that when you get used to paying the minimum amount owed, this is exactly what it looks like to start entering the vicious cycle of the debt trap.

3. Withdraw money from a credit card

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Another mistake that harms your financial health is the habit of withdrawing money on credit cards. Ignoring or simply ignoring the consequences, many credit card users tend to make this mistake. What these users don’t realize is that credit card cash withdrawals incur not one, but two charges. First in the form of a cash advance fee on the amount withdrawn and second in the form of high finance charges, which are enough to burn a deep hole in your pocket. In addition, the financing fees are debited from the day of withdrawal until full reimbursement.

4. Be seduced by EMI options without checking your repayment capacity


The attractive EMI facility, especially the no-fee one, has become an extremely popular feature of credit cards in recent years. While it is fine to go for the EMI facility, ignoring your repayment capacity is not acceptable. Among the various EMI mandates offered, not choosing the right mandate can cause credit card bill reimbursement problems. Not only are IMEs added to the invoice each month until the mandate exists, but they are also added to the minimum amount due. For example, your credit card bill for a month is Rs 10,000, including Rs 3000 for EMI. So instead of your minimum amount due being around Rs 500 (5% of 10,000), it will be around Rs 3,000 plus 5% of (10,000-3,000 = 7,000) i.e. Rs 3000 plus 350 = Rs 3350. So each time you jump to the EMI facility, remember to choose only the tenure whose corresponding EMI is comfortable to repay, without pushing you into difficulty paying bills, and at worst a possible debt trap.

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