Experts warn people to be extremely cautious while using credit cards. This is especially true for people who are not very careful about their finances or do not have money management skills. These people fall easily in a debt trap and should use a debit or prepaid card instead of credit cards.
We all know that credit cards come with extremely high-interest rates – ranging from 2 per cent to 4 per cent per month, which is around 24 to 48 per cent annually. Having said that, credit cards also prove to be one’s best friend in times of crisis. With credit cards, one has access to instant money in times of need. However, if these cards are not used properly, apart from ruining one’s credit score, they can also push someone into a debt trap, coming out of which could be a difficult task.
This is one of the reasons experts warn people to be extremely cautious while using credit cards. This is especially true for people who are not very careful about their finances or do not have money management skills. These people fall easily in a debt trap and should use a debit or prepaid card instead of credit cards.
Keeping this in view, here are some types of people who should always avoid using a credit card:
1. Impulsive buyers
These types of people spend money impulsively and extravagantly. Due to their spending pattern, they exceed the limit of their card since they can purchase anything on the go with ease. This does not bode well for them as they are deemed as credit hungry people by banks and their credit score goes down. Hence, when these kinds of people apply for any credit in the future, there is a high chance that they will get rejected.
2. Delinquent bill payers
Undisciplined and irresponsible bill payers are those who do not pay their bills on time and most often delay or even miss their bill payments. Hence, having a credit card could be a risky endeavor for them as once the payment deadline is over, credit cards charge high rates of interest along with a penalty for missing the payment. This also reflects poorly on one’s credit report as their credit score is reduced considerably. Hence, avoid having a credit card if you think you are not disciplined with your bill payments, to avoid getting into a debt trap.
3. Those who fund everyday expenses
People who use their credit cards to fund their everyday expenses, fall in a debt trap and the cycle goes on. These individuals often go broke by the end of the month and use their credit cards to fund everyday expenses. Credit cards attract high-interest rates in the range of 2 to 4 per cent per month, and these people using their credit cards to fund everyday expenses fall into the revolving credit trap and have long-term debt problems.
4. Those who hardly use the card
There are people who possess more than one credit card but hardly use them. As the overuse of a credit card hampers your credit score, hardly using a credit card also ruins its purpose. If credit cards are not used, means the cardholder is not utilizing their cards to the fullest. For these types of people, having a debit card instead is a better option as they will not have to track the payments due if any.
5. Persons who revolve their credit
This is where banks and credit card companies earn the most. Even though banks and credit card companies nudge their customers to clear their amount due on time to avoid interest, late fees, or charges, banks actually want their customers to revolve their credit card dues because this way they make the most profit. Therefore, cardholders who perpetually revolve their credit should avoid doing that or never have a credit card. These kinds of people often find themselves revolving their dues every month, and accumulate high-interest charges in the bargain.