Credit card debt trap: Avoid it by all means
By Neelima Shankar
Jan 20, 2008
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New Delhi: It is not difficult to find credit card owners who are trapped into vicious circle of credit card repayments. Be it overspending on credit cards, owning multiple credit cards- which are difficult to manage or just borrowing above one's repayment capacity, there are numerous reasons to get into credit card debt trap.

Credit cards are good resources for online payments, emergency funds and provide more convenience than cash. Essentially credit cards are just high interest unsecured loans, which often have interest rates around 30 to 40 percent coupled with excessive fees for various usages.

Credit card holders are lured into applying and obtaining more credit cards by credit card  companies with attractive offers. Credit cards work best for those who repay the entire balance within the due date every month. Thus effectively they get an interest free credit for this period. However, the honeymoon is over when one misses a repayment, or doesn't pay the entire outstanding balance every month. The freebies, grace period, rewards and all other goodies that are promised with a credit card, vanish as soon as a credit card holder defaults on his repayments.

Avoiding a credit card debt trap and falling into the credit card repayment trap can be easy if a credit card holder understands his credit profile, the number of credit cards required, and in case someone has multiple credit cards how well he is able to manage his repayment dates. Other things like the ones listed below also helps keep the credit card debt at bay.

Understand the terms and conditions carefully and get every doubt cleared before using the credit card. If you don't like the terms don't use the card at all.

When it comes to the number of credit cards, remember the key is the minimum. In most cases two credit cards will suffice.

Credit cards are best for those who repay their entire balances before the due date. This is the ideal way to use a credit card.

Cash withdrawals using credit cards shouldn't be done unless there is an absolute emergency. The interest rates, cash advance fees will make this borrowing a very costly one.

Never settle for the monthly minimum payment. This is the costliest way to repay the credit card bill. The credit card companies want you to feel comfortable about repayment by paying just the minimum every month. However, if you fall into the trap, you'll be filling up the credit card company's coffers.

(Comments Posted : 1) Post Your Comments
1. I found a service called Credit Card Zappers to help with debt.

I'd recommend them first. They took off my interest and overlimit fees, even though I was current on payments.
Audrey (Posted: Jan 20, 2008)
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