5 key credit card tips for beginners to avoid debt settlement

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Using credit cards can help you overcome the immediate shortage of funds, but they should be treated with care.

In addition to impacting our lives, the coronavirus pandemic is also putting pressure on individuals’ personal finances. While some companies have resorted to pay cuts, others have reduced their workforce. Even self-employed workers based on their business income see their income decrease due to blockages and restricted movement in the country.

In such circumstances, basic household expenses including expenses related to long term goals such as child rearing, marriage, etc. Sometimes there is an urgent need to replace consumer goods and other common electronic goods in the home. With limited or limited resources, the use of credit cards is often resorted to and for more offer go to consolidationnow.com

Using credit cards can help you overcome the immediate shortage of funds, but they should be treated with care. Any mismanagement of credit cards can lead to a heavy debt burden which can become too expensive to service. Ultimately, in such a case, one has to opt for debt settlement but the credit profile is negatively impacted.

There is a credit card spending limit that you get when a card is issued to you. Try not to use up the limit each month, as this could affect your credit score, especially if there is a rollover of contributions.

Likewise, there are a few other crucial credit card tips for beginners to avoid debt settlement anytime in the future.

1. Pay the full amount on the due date

It is important not to carry over credit card contributions. This means, pay the full amount outstanding on the due date. While it is mandatory to pay only 5 percent of the amount owed each month, avoid making partial payments as much as possible. Carrying over the outstanding balance to the next billing cycle will result in an interest rate of 3-4% on a monthly basis. If you keep rolling and simultaneously make new purchases each month, the interest portion may skyrocket and soon you will fall into the debt trap.

2. EMI or balance transfer

In case you are not able to make a full bill payment and especially if the amount spent on one or two items is high, ask the credit card issuer to convert it to EMI. By converting to EMI, you will end up paying a lot less than what you would have paid as normal credit card dues. Alternatively, you can transfer the unpaid amount to another credit card at a reduced interest rate. This is only possible if you have more than one card.

3. No interest-free period

Typically, there is an interest-free period on purchases made with the credit card. It can be as low as 18 days and can even be over 45 days. However, there is a big problem before you can take advantage of it. In order to benefit from an interest-free period, the outstanding amount must be zero. So, if you post a certain amount on the next month’s billing, there is no interest-free period on new purchases.

4. Automatic debit from your account

Typically, late fees and late interest are very high. To make sure you make your payments on time, opt for direct debit. By giving standing instructions to your banker, the full amount of the credit card bill will automatically be deducted from your bank account on the due date. There is another option to pay only 5 percent, but it is better to pay all of the unpaid dues.

5. Avoid cash withdrawals

While spending on a credit card comes with an interest-free period, there is no such benefit in the case of cash withdrawals. You can use credit cards to withdraw money from ATMs, but interest starts accruing from day one in most cards. Withdrawing money from the credit card does not have an interest-free period. There could be a one-time fee plus interest charges that start from day one until you repay the amount. Just avoid it unless you’re struggling to find short-term funds for an emergency event.

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