A CREDIT card may be a payment card issued to its users to enable the card carrier to pay any merchant for goods and services on its accrued debt. It is a thin plastic or metal rectangular shaped card holding a limited sum of monetary value which can be used to purchase any goods or services and is issued by financial institutions upon fulfillment of necessary steps and procedures. Credit cards impose the condition that cardholders will pay back the borrowed amount of money plus applicable interest charges if any and any other charges that have been agreed upon within the time limit given either wholly, partially, or quarterly, whichsoever is decided. Lets discuss how credit card debt problem occur.
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There are many features and characteristics of a credit card which are as follows:-
1- EMI Payments
Credit cards come with a unique facility of EMI, which means that one can buy any goods and services and pay for the same thing in a small amount of money till a certain time.
2- Easy approval
Credit cards tend to get easy approval in almost all the places in and around one’s nationality. In other words, one can use a credit card globally.
3- Customised card limit
The limit for the amount of money can be customized according to one’s wish and desires, and it can be from a small amount of twenty thousand to a larger amount of two lacs.
4- Loans during an emergency
Credit cards have a unique facility of providing loans during an emergency which is easily accessible almost anywhere without any unwanted harassment.
5- ATM cash withdrawal
One can even withdraw money from credit cards through ATMs. Yes, you heard it right now day credit cards come with these kinds of exotic facilities as well.
6- Discounts
A credit cardholder enjoys a lot of discounts almost the entire year on amazing brands and products.
7- Offers
The offers given on credit cards are just eves dropping as huge discounts, and free goodies arise on almost every credit card swipe.
8- Rewards
Credit card users are also entitled to amazing rewards and cashback facilities which they can enjoy by buying the desired products or even choosing from the services provided.
9- Secure pay
The payment through a credit card is safe and secure and is hassle-free at the same time. There is no risk, or rather the very little risk of fraud through credit card payment procedures.
There are certain advantages of credit cards which are as follows:-
1- Opportunity to build credits
There are many opportunities of building credits with the help of using credit cards.
2- Earn rewards such as cashback or miles points
One can earn mile points through credit cards which gives advantages and benefits while traveling through flights, and can even enjoy benefits at the airports by using its lounges and others.
3- Protection against credit card fraud
Another credit card facility is that one is most of the time saved from fraud.
4- Free credit score information
One can easily keep a record of all the free credit scores regularly added to their credit card
5- No foreign transactions fees
Using credit cards in foreign transactions is almost free except for in a few exceptional cases.
6- Increased purchasing powers
The power to purchase increases as one does not need to worry about the limited amount of money.
7- Not linked to checking or savings account
Credit cards are not generally linked to any savings accounts, thus making them more secure.
8- Putting a hold on a rental car or hotel room
One can put a hold on renting a car or hotel room with the facilities that come along with being a credit cardholder.
9- Manage cash flow
It becomes easier and more convenient to manage cash while using a credit card.
10- Saving on interest and fees
Though not always and regularly, one can save on interest rates and charges most of the time.
11- Avoid utility deposits
The deposits utility can be avoided with the help of credit cards. However, certain terms and policies are required to be followed and considered.
12- Emergency fund backup plan
Credit card acts as emergency funds that can be used when one needs money.
13- Better credit card rewards
There are many rewards for using credit cards which the credit card holder enjoys almost the entire life tenure of the card issued.
14- Limit financial fraud
The fraud that occurs through finance turns on to be limited through credit cards as the user is mostly cashless.
15- Travel protections
Credit card works globally, so it also provides the facility of travel protections.
There are certain disadvantages as well of using credit cards which are as follows:-
1- Minimum due trap
Though the issuing of the credit card the issuer does not mention, it is also a kind of trap as the due date in which one has to repay the money is quite limited.
2- Hidden costs
There are many hidden costs in a credit card which generally the issuer does not let you know.
3- Ease of overuse
Since it is easy to use and hassle-free, a credit card user tends to overuse it without realizing its drawbacks which are to arise in the near future.
4- High-interest rate
The interest charges on the time of returning the money used by the credit cards are quite high, which even makes it a little difficult at times.
5- Credit card fraud
Not always, but credit card fraud does happen.
6- Monthly scrutiny
Credit card tends to have a monthly observation or examination.
7- Temptation
By regular use of the credit card, the user is generally tempted by the facilities provided and starts using it unnecessarily as it becomes a habit.
8- Tricky short-term teaser rate
The rate which the issuer shows when issuing the credit card is quite less, while in actuality, the rates are quite high, and they easily trick the holder in the first instance.
9- Credit damage
There happen to be frequent credit damages, which hamper the cardholder.
10- Other fees can be quickly added up
Apart from the interest rates, there are other charges, which are quickly added up without the holder’s knowledge.
Debit Card and Credit Card-
1- Definition
Debit card carries the money available in the bank account that you can use. In contrast, a credit card carries the money that one can use but is not theirs and is given by the credit card company, which must be returned.
2- Source of funds
The source of funds in the debit card is the personal saving of the individual, whereas, in the case of a credit card, the source of funds is from the credit card company.
3- Spending advantage
The amount one can spend through a debit card is the only amount one has, while in the case of a credit card, one can spend more than they have.
4- Who pays for the purchase
In a debit card, the owner of the card pays for the purchase, whereas in the case of a credit card, the credit card company pays for the purchase of the cardholder that is to be paid later on by the cardholder to the company.
5- Bill
There happens to be no bill or statement in the case of a debit cardholder, whereas there happens to be a bill or statement at the end of each month in the case of a credit card.
6- Payment
There requires no need for payment in the case of a debit card as one uses its own money, whereas, in the case of a credit card, one needs to pay the money at the end of the month as the money is borrowed.
7- Charges
In the case of the debit card, there are no fees or charges, but in the case of a credit card, there are a lot of charges added up.
8- Rewards
There is no reward or very few rewards in the case of debit cards, whereas rewards and offers and points or miles privileges are quite high and maximum in the case of the credit card.
9- Privileges
Debit card comes with no privileges at all, while on the other hand, a credit card comes with unlimited or maximum privileges being offered.
10- Lost card liability
Protection from theft or lost card charges are minimal in the case of debit card, while in the case of credit card, there is no lost card liability given to the cardholder.
11- Interest
There are no interest rates charged on debit cards, while high-interest rates are charged on credit cards and hidden charges sometimes.
Credit card debt is the money a company owes for purchases made by credit card. It generally appears under liabilities on the balance sheet. Credit card debt is a current liability which means businesses must pay it within a normal operating cycle. It is a debt that is an unsecured liability incurred through revolving credit card loans. Borrowers can accumulate credit card debt by opening numerous credit card accounts with varying terms and credit limits.
Generally, it refers to the accumulated outstanding balances that many borrowers carry over from one period to another or from month to month. Credit card debt can be useful or added advantage to borrowers seeking to make purchases with deferred payments over time. There happen to be certain benefits as well for credit card debts as credit cards are popular forms of revolving credit and offer numerous benefits to borrowers.
In simpler terms, credit card debt is a debt when a credit card user uses the card to purchase goods and services and then does not pay the amount borrowed. Later on, it adds up along with all the relevant charges and turns into a debt known as credit card debt, as it is the loan that is still left to be paid. The results of not paying the credit card amount are quite dangerous as the credit card company keeps on adding charges and penalties, which in the end turns up to be quite huge in amount. Credit card debt is a rampant problem in today’s society, affecting 40% of households. Credit card debt and private loans are two different types of debt. Private loans such as mortgages, gold loans, vehicle loans, and student loans are typically granted as one large initial amount that is then paid back over a long period.
In contrast, credit card debt differs from these other forms of debt in that it grows very quickly due to additional purchases and interest charges. However, credit card debt can be paid back all at once if managed well with proper finances and expenses. Credit card turns out to be a kind of addiction that influences people to buy and purchase goods and services which are not even important to them. Credit cards lead to unnecessary buying and purchasing, thus leading to credit card debts. One can even pay off the debt at the right time or within an extended date, but credit card debt is much more difficult to pay off if deadlines are not met because of the higher interest rates charged for credit card loans. While credit card debt can be very difficult to come out of, it is not impossible. Many financial consultants and experts have various methods for paying off a variety of debt over time and staying out of credit card debt if, all at once, you have paid it off. If everyone paid off their credit card loans in full monthly, interest and fees could be entirely avoided, completely eradicating credit card debt.
How can one get down from the credit card debt?
Well, one can get down from this credit card debt in a few easier and simpler steps:-
1- Get on budget
To pay off the debt, one first needs to get down on budget and buy and purchase essential and required things.
2- Stop using the credit card
To let not increase the debt, one at first stop using the credit card immediately as using the card will add up extra to the debt.
3- Save some emergency fund
One should start saving some extra money if, in any month, this emergency fund saved will help the cardholder pay off the money.
4- Lower the bills
In the first step, one must lower the bills to say that one must limit their expenditure and add on their savings.
5- Cut down expenses
Unnecessary expenses should be neglected as paying off the debt should be the most important topic of concern.
6- Sort priorities
One must sort out priorities to maximize the saving and limit the expenditure.
7- Make extra income
If possible, one should start looking to make extra money so that the debt is paid off easily and more quickly.