When you purchase a product, you happily pay through a credit card. It comes with a credit limit that will calculate on credit score. A good CIBIL score obtains a higher credit limit.
With a credit card, you can access a free lounge, pre-approved loans & much more facilities. But also, you will have disadvantages of credit cards. We will give you 4 disadvantages of a credit card. Keep Scrolling…
The 4 Disadvantages of Credit Card
1. Hidden Charges
One of my friends Nilesh bought a laptop & convert it to a monthly installment through a credit card. He doesn’t know about hidden charges and continually paying EMI with taxes. As active credit card users, you must pay joining fees, annual fees & other processing fees.
If you miss the credit card payment on time, banks will charge late fees. These late charges will badly impact your credit score.
2. Pay Minimum Amount
Let’s assume your credit card bill is Rs. 10,650 and the credit card application displays you pay the minimum amount. It is a big trap. When you pay the minimum amount, the bank will charge interest on the due amount.
Without knowing the details, customers fall into this trap and pay a huge amount.
3. Interest Rate
Always clear credit card due bills on time. If you miss the payment on time, your due amount is carried with interest rate. Let’s understand the actual meaning. Suppose my credit bill is Rs. 15,890 and I forgot the due billing date which was 31 Aug. So, now I have to pay the due amount with interest rate.
Credit card interest is much higher compared to other loan products. It can be 2.5% to 3% per month. This is one of the disadvantages of a credit card.
4. Spending More
When we pay the amount through a credit card, the bank balance remains the same, and this strategy forces us to spend more. Always track your credit card bill after spending. You should take every day. This way you will spend less & save more money.
How to Use Credit Card
Just follow some points before falling into the credit card trap. Make your disadvantages to advantages with simple rules.
- You should be aware of joining fees & annual fees of credit cards before use.
- Read the benefits of a card that will help you. Most of the time we use premium credit cards without knowing the actual benefits.
- Track your spending every day. That will help you to save more money.
- Use 30% of the credit limit. It will maintain your credit health score & increase your CIBIL score over time.
- Choose EMI on the credit card that wills actual needs. With credit cards, we can convert products in monthly installments without need. This way we are paying monthly GST & taxes on the EMI amount.
- Pay your card bill on time. If you miss this, you have to pay the due amount with a higher interest rate.
FAQs on Disadvantages of Credit Card
Is it credit card really helpful?
Credit Card is an important part of our busy lifestyle. Credit Cards solve much more problems such as paying money instantly, paying international transactions, building credit scores, etc. If you use a credit card the right way, it will give you much more benefits.
How to use credit card limit?
Always try to use 30% of your credit limit. This will maintain your good credit score. Track credit limit every day before use.
What are the disadvantages of credit cards?
Credit Card comes with much more disadvantages. We will talk about the 4 disadvantages of credit cards. 1. Hidden Charges 2. Pay Minimum Amount 3. High-Interest Rate 4. Spending More Money.
What are the 3 benefits of credit cards?
Credit Card comes with multiple benefits. But the important 3 benefits are 1. Improve credit score 2. Pre-approved loan 3. Pay money instantly.