Do you like shopping with a credit card? Have you ever thought about the dangers of using credit cards? Using credit cards wisely is very helpful. However, if it is used only for waste it may cause your financial problems in the future.
For new credit card users, credit cards can be dangerous because they cause the desire to use a credit card. Even some old credit card users still fall into the credit card trap.
Still like extravagant? know the dangers of using credit cards excessively and how to avoid them:
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1. The Temptation to Spend A Lot of Money
A study shows people spend more money when they pay using credit cards instead of cash. Even in one study, participants were willing to spend up to twice as much money when using a credit card than cash.
To avoid this, make sure you set a limit on your personal spending with a credit card. Use a credit card according to your ability to pay credit cards every month. Avoid spending money on things you don’t need or living a lifestyle that makes you extravagant.
2. Risk of Damaging Your Credit Score
Paying bills late can hurt your credit score. If the credit card balance is not paid off, your credit score will decrease. Credit scores are very important, especially if you want to apply for a loan. You should pay close attention to the dangers of using a credit card.
The way to avoid a bad credit score is to pay your credit card on time. Apart from that, you can also keep your balance below 30% of your credit limit.
3. Risk of being in debt
Using a credit card is the same as borrowing a debt. And that puts you in debt to the bank. The more often you borrow money, without paying it back, the greater the debt you will incur.
How to avoid credit card debt piling up? The most important thing you need to do is stop using your credit card excessively. Use your credit card appropriately or only for essential purposes.
4. Not Attaining Peace of Mind
Living without debt is very convenient because you don’t have to worry about late fees, interest, annual fees, or fees that exceed the limit. Large credit card debt may make your mind uneasy.
Once you know how much you owe on your credit card, you can create a plan to pay off the debt. Making a plan to clear your debt will help ease your mental and emotional burden, as well as give you the hope and motivation you need to become financially free.
Understanding the dangers of using a credit card can help you use your credit card wisely. By avoiding credit card debt, you can save more and have the opportunity to achieve your other financial goals.