Hello Friends,
With more adoption of digitization online payments are more popular. It is more popular because this method is convenient and we can make the payment from anywhere or even from home. No need to visit any place and that saves a lot of time with online payment things are easy. Credit cards are also getting more adoption in the market and after covid banks have seen more demand for credit cards.
This growth is good for the digital economy but there is one challenging part. This is about the repayment of the credit card. I think that credit cards are not for everyone, especially people who are not good at finance management. Every month bill is generated for the credit card showing the outstanding. There are two components in the bill and these are total due and minimum due. Ideally, it is recommended to pay the total due and settle the outstanding completely. Minimum due is the option that we can pay and continue to use the card without any effect on the credit history.
Now the tricky part is that the outstanding will be considered as a liability by the bank and the entire amount will be taken for the interest. In India, this interest is very high and monthly they charge 3.5%. This is why I call it a trap because this interest rate is too high. You know art in savings accounts the annual interest rate is 3.5% and some banks are offering even less. But with a credit card, the monthly interest rate itself is higher than the savings booking account interest.
I use credit cards and I make sure to pay the entire outstanding by the due date. I have never paid the minimum amount and it's been a few years for me using the credit card. I have about five cards as of now and every card I use with discipline and make sure to pay the outstanding in total before the due date. I don't want to be in the trap of liability and debt so I pay off as it should be.
Thanks for stopping by