The credit card is often the source of much financial problems. The main reason is there is no cash involved in credit card transaction. Unlike as compared to direct cash transaction, you see the money flying out of your pockets. In credit card, since you don’t see the money physically, you don’t realize how much you have spent. Because of this reason, many folks fall into this trap of overspending. Yes, it is quite fun using the credit card for spending.
The real problem is not about overspending using credit card but is when you do not play the bill in full. The bank charges you for the interest 2% per month. Well, that’s a little you might think. That is mostly likely what the banker tells you too. We only charge 2% interest which is very low on your credit card loan. You should be able to pay the 2% interest. You just need to pay for 20 bucks for $1000 credit card loan. What they don’t tell you use, 2% per months is equal o 24% per year. The banks 24% out of your earn. This is a lot of money. I repeat, 24% interest per year is a lot of money which I think this is the highest return that the banks can make as compared to housing loan, hire purchase (car loan) and etc.
These are the 3 things you want to avoid to use credit cards wisely:
- Treating purchases as if you’re still using cash
- Paying bill in full before the due date
- Avoiding the cash advance facility
- Use one credit card is enough