Is a credit card a trap?
Yes, Credit card is a type of trap and it has been made to trap us in the cycle of the loan. But, by using it properly, we can get many benefits from this.
How do people get trapped in a cycle of Credit depth?
The credit card gives us a loan for 15 to 45 days with a 0% interest rate. So that can use this money in an emergency when we do not have money.
Due to this greed, we take credit cards.
But the problem comes when we exhaust the entire amount on the credit card and we are unable to repay the money.
Then the real game of credit card companies begins because if we take an ordinary loan from the bank then, we get only 12% to 18% interest in a year.
But after the billing date is exceeded the credit card interest of 2.5% to 3.5% interest is charged every month and if we talk about annual interest, then it takes 30% to 42% which is 2 times more interest than an ordinary loan. Due to this, we get trapped in the credit card loan trap and our finances get very bad.
Pros of credit cards
Credit card is very useful in a medical emergency like a medical emergency by which someone's life can be saved.
We get interest-free loans for 15 to 45 days with credit cards.
Credit cards allow us to improve our credit scores so that we can get bigger loans in future.
With a credit card, we get many rewards points and discounts through this.
Cons of credit cards
High-interest rates can ruin us financially by trapping us in the cycle Of loans.
If we do not repay the credit card loan On time, then our credit score will be bad and we will not get further loans.
How to build a good credit score?
You have to keep your credit utilization limit below 30% every time. If it is above then 30% you will realize that your Credit score has been affected.
If your salary or income is more you can do one thing that you can request your bank to increase your credit card limit.
What will happen next if you have a 10000$ limit and now it 2000$ example if you were using 500$ it was at 50% credit utilization which meant you are using 50% off your credit but if the limit is 2000$ and you are using 500$ then your credit limit is 25% which is less than 30% which means it is good for your credit score.
You can do one more thing you can get a new card if your income is good and if you are spending from one
card again and again and its utilization percentage is high then
you can get a new card, in which you do not have to pay joining fees and annual charges.
Don't apply for too many credit cards. if you need one or two credit cards, put a limit on why you apply if you don't need a lot of loans.
Take an easy loan and pay as soon as possible. Due to this your credit score gets increases.
Don't check your credit score again and again. Checking the credit score again and again also makes the credit score worse.
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