In India since the digitalization is increasing, people are becoming more and more aware of the products out there. One such product is Credit Card. On the internet it is been shown as the option of getting boworred money any time if you don't have any money. For example, if you don't have money just use the Credit card. Now the problem is projecting Credit Card as the unlimited money is actually a bad thing.
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A lot of people are actually buying a lot of credit cards, because for them more credit cards means that they have more money to spend. They use the Credit card to buy gadgets at no cost EMI because that gives them the flexibility to pay it installments. But the problem is that people buy a lot of things on that EMI and thus unable to pay.
According to the RBI the credit card defaulters are on the rise and is continued to rise because people are not aware of the issues which they can face because of that. For example, I have an uncle how got fond of yhe credit card and got 3, 4 cards. In Diwali, he brought a lot of gadgets for his family with the no cost EMI option. But his fear came when the EMI of the next month because 50% of his total salary. After a point he could not pay the minimum amount to the credit card and thus he has to take personal loan to clear off the mountain of debts.
He became victim of credit card debt trap and thus he has to sell of one of his property to clear the personal loan because it was so big an amount. To be honest there is a basic knowledge problem. People take credit card, but doesn't know the high cost associated with it or the problem which can arise because of it.
I too use the Credit Card, but I use only that amount which I have the money in the bank. For example, if I use the Credit card for Rs 20K, I will have that equal amount in my bank account to pay off at the end of the cycle. You might ask why I use Credit Card then, because of the awesome offers it gives. That Rs 20K on credit card helps me to earn the cash back or points. Whereas Rs 20K in my bank account pays me the interest, so I benefit from both of them.
Similarly there as an another uncle asking me if he should have the Credit card. I said, he should have provided that he keeps the same amount in his bank account and it auto debits from the account to the credit card payment so thar he doesn't defaults it. He is using it from last 3 years and never defaulted a payment. Now he is asking me for another credit card recommendation so that he can earn more points.
See the difference, the difference is mere the knowledge of using a product and how to use it in a better way. 8 would ask people to refrain themselves from using the Credit Card if they cannot limit themselves.
But what if you are on the Credit Card debt and wanted to come out of it. The best way is to take a personal loan because personal loan interest is just 12% whereas Credit Card interest ranges from 30% to 45%. So moving to oeesonal loan saves you a lot of money. Next is to try to payoff the loan as soon as possible, of possible try to cut off savings, expenses as much as possible to get out of that loan. After coming out, try not to fall on thar same trap.
