Credit cards are often seen as a symbol of financial maturity and modern lifestyle. With offers of discounts, cashback, and easy transactions, having a credit card is indeed tempting. However, did you know that this plastic card can become a debt trap if not managed wisely? Before you decide to apply for a credit card, recognize the signs below to see if you are ready to have a credit card or not:
1. Having the Mindset: Credit Card = Free Shopping
This is the most fatal misunderstanding. Many people think that credit cards are an extension of their salary or even “free money” to fulfill all their shopping desires. In reality, a credit card is short-term debt. Everything you swipe is money you must repay to the bank, plus interest if you don't pay it off on time. If you use a credit card to buy consumer goods that you can't actually afford with cash right now, that's a sure sign you're not ready.
2. Only Pay the Monthly Minimum
Each month, the bank will set a minimum payment (usually 5% to 10% of the total bill) that you must pay. Although this seems small, only paying the minimum is the fastest way to accumulate large debts. Why? The remaining balance that you do not pay off will be subject to a fairly high interest rate. If this continues, your debt will continue to balloon, and most of the money you pay will only cover the interest, not the principal of the loan.
3. Not Knowing Your Own Credit Card Limit
Do you know exactly what the maximum limit is on the credit card that the bank has given you? Ignoring your limit is a warning sign. Healthy debt management requires you to control your credit utilization ratio, which should ideally be below 30% of your total limit.
4. Not Aware of Credit Card Bill Due Dates
Credit cards come with two important dates: the billing date and the due date. The due date is the last day you can pay your bill without incurring late fees and interest. If you often forget or don't write down the due date, you will often be late in paying. The consequences are not only penalties, but also accruing interest that makes your bill even more expensive.
5. Not Understanding the Benefits of Your Credit Card
Each credit card is designed for specific users and offers various benefits and rewards, such as airline miles, reward points, or discounts at certain merchants. If you only use your card to swipe without ever knowing what benefits you get, you are wasting potential profits. Indifference to benefits shows that you do not yet see credit cards as a strategic financial management tool.
Source: Skorlife.id
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