The amazing convenience of credit-cards made it the most popular consumer payment instrument in most of the developed economies. Credit cards have been in use since 1950s when the Dinners Club issued their first credit-card in United States which was intended to pay restaurant bills. With the advent of credit-cards, the banking industry seemed to be biggest gainer, with the interest rates started soaring to 20-25% annually, more than double the GDP growth.
Advantages of credit-cards:
Disadvantages of credit cards:
Statistics reveal that majority of the credit-card users are the youth. The fast growing economy and a booming middle-class population with an ever increasing disposable income makes people an impulsive-buyer. This paradigm shift in the approach of consumers has made it easy for the credit-card companies to woo the gullible Indian customers in large numbers.
Ways to exit credit card debts:
As Jeremy Vohwinkle points out:
* First, list each of your credit cards. You’ll want to include the outstanding balance, interest rate, and minimum payment. This information can easily be found on your last monthly statement.
* Order the cards on the list so that the credit card with the highest interest rate is at the top, and the lowest is at the bottom.
* Sum up the minimum payments.
* The total monthly minimum is your absolute lowest monthly payment. But remember, we want to pay more than the minimum in order to repay the debt quickly. So, take a look at your budget and see how much extra you can come up with each month in addition to the minimum.
* As your payments come due, pay the minimum on each card except for the one at the top of your list. Remember, that one has the highest interest rate and it costs you the most money by maintaining a balance. So whatever additional money you budgeted in the previous step, apply that to that card.
Finally, Ogden Nash’s advice: “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them”.
The writer is a features correspondent at Youth Ki Awaaz
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