Most of our senior citizens and peer groups advise swipe credit cards and relish services like reward points, cashback (of a certain percentage), seasonal promotions, and purchase protections. However, there are instances when credit cards should be hidden in their wallets or purses. Below mention are ten occurrences when credit is not a viable option and can go against personal interests.
Car Loan Installments
If an individual has leased out or sought a car loan and finds it financially stressful to pay Equal Monthly Installments (EMI), using a credit card to cover the EMI payment is not a viable option. In doing so, the same person is piling more debt and perhaps creating a debt trap. At the end, when the person has reached the financial threshold of payments on a car loan and credit cards, the person will pay interest amounts on both types of finances.
Furthermore, if the payment expenses overtake the disposable income, both finances will pile up into default payments. Subsequently, the person’s credit report will yield a bad score.
Mortgage Payments
Of all the kinds of finances, mortgage finance and the payment is more than the EMI of a car loan. If the person uses the credit cards stack to make the payments, then, consequently, the result will be the same as mentioned. The stress is going to amplify. In this situation, the best way moving forward is to visit the bank and renegotiate the terms of the payments. It is called restricted, where the bank can grant an extension of the maturity period and lower down the monthly payment. Thus, easing out the heat coming from an empty wallet.
Online Money Transfers
Always use cash while making domestic or international transfers to anyone, such as Western Union, etc. This kind of payment is a no-go area for credit cards. The reason is that as soon as the credit card is swiped, a transactional fee is debited from the credit card balance and the interest calculation starts immediately.
Costly Art, Antiques, and Collectible Items
Avoid making purchases of frolicsome products; even there is a significant limit on the credit card, like a Black Card (Amex), Platinum Card, etc. Furthermore, such luxe items may not be covered by insurance (credit card). If cash is available or the person has sufficient balance in the savings accounts, then a simple online money transfer through debit card or cheques would be plausible.
Home Renovations
Even if the house warrants refurbishment or remodeling, the exterior and interior décor, think before pulling out the credit card from the wallet. It is pertinent to mention that renovation is a very costly business and payment via credit cards is not advisable. However, if the house requires renovation and the person requires money on dire-straits measures, then seeking out a personal loan will be a better option and less cumbersome.
Lending or Giving Money
After there is humanity in us, but when it comes to credit cards, always be selfish. Lend money or pay to your relatives and friends if you have cash or adequate balance in the savings accounts. Even if they pay the amount back, think about who is going to pay the interest amount accumulated on the credit card.
Medical Invoices
If you are not covered by insurance, then a credit card is no solution. It is another no-go area for credit cards. Medical bills and invoices for diagnosis and treatment can be exponential. Always resort to medical insurance, as medical lien agencies in the US act as a negotiator between the doctor and the insurance company.
Education and Tuition Fees
Always exhibit reluctance in swiping the credit card for educational expenses. Availing a personal loan from a bank is a much better option to pay the tuition fees, as the interest rates are comparatively lower than a credit card.
Upfront payment to purchase a House
Perhaps the quickest and easiest way to fall into a debt trap is by using credit cards. Do not go for the purchase unless there is an ample amount of balance in the savings account. Purchasing a home brings along other expenses, such as legal fees, property taxes, etc., to avoid the debt trap at all possible in this scenario.
Huge Business Expenditure
Never finance the sources of your business through personal credit cards. Even if the purchase is for small office equipment or stationery, always keep a business credit card. Just remember, never mix business with pleasure.
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