Does a Credit Card Increase Your Expenses?
This question is crucial because we see a lot of user these days use a Credit card in verity of ways without thinking of the repayment. This article no way discourage the usage of credit card rather this is an attempt to educate the users on the merits & demerits of having a credit card and the adverse impact this may have if a Credit card, for that matter any financial instrument is not used in a conscious way.
Credit cards give people a reason to spend money. However, careless spending leads to debt and increases your expenses as a result. Why do people use their credit cards then when they know what the future holds for them—credit card bills? It is simple and convenient to reach for your credit card than give cash.
Hence, the question: “Does having a credit card increase your expenses?” becomes true for them. The following points will make you realize of the bad habits that may increase your expenses:
You Spend More than You Earn
When you are using your credit card on a regular basis, you lose track on the material things you are spending your hard earned money on each day. If you continue to spend carelessly, your credit card debt will increase, especially if you miss a payment.
That is not all you need to worry about, as you will find it difficult to save money, as most of your money will go to paying off the credit card bill each month. Instead, why don’t you reserve paying items with a huge price tag with your credit card, only use it during emergencies, or use it pay off a certain utility bill.
Your Wants Take Precedence over Your Needs
You are unable to differentiate between your wants and your needs. You tend to prioritize your wants above your needs. If you have developed a habit of doing this, you need to correct it. You need to refrain from using your credit card for clothes, shoes, fast food restaurants, or other high-end products, unless you really need it such as a brand new fridge, a microwave, etc.
Try this strategy: You see something you really like. Do not buy it, but go home. The next day, think if you really want it and if you do, buy it.
You Use Your Credit Card More than Your Debit Card
When you use your credit card, you have a mindset that you will repay it at the end of each month. Repeated purchases on the credit card increase your bill. If you cannot repay it and do not pay before the due date, you will incur a late fee. If you have debit card, you will know you are spending your own money. When you are making a purchase with a debit card, you will think twice if you should go ahead or not. It is better keep your debit card in your wallet and leave your credit card at home.
You Make Random Purchases
You use your credit card to make random and minor purchases, a point discussed briefly in one of the headings. If you are purchasing grocery items such as a gallon of milk or bread with your credit card, you need to stop, as you are only increasing your expenses.
Having said that, Credit cards can be extremely useful if one uses cautiously. The instrument can help you in tons of ways if a careful approaches taken to the same.
- Credit card can be extremely helpful in emergency situations.
- Convenience in online purchase, recurring bill payment etc
- Will help in building a good credit score over a period of time, which will intern help in future credit needs.
- Small reward points offered by Credit card providers get accumulated over a period of time.
- There are providers who also provide additional offers, such as Discounts (product purchase, fuel, air miles etc), Free Insurance schemes etc which will bring value in an alternative way.
- Purchase the desired goods & pay in installments.
Following are few things we should consider if we opt for a credit Card
- Use the card only when necessary
- Keep an eye on the bills & never miss payment due date.
- Keep the card & credentials secure
In conclusion If you use your credit card without thinking, you are increasing your expenses, especially if they are already high. However a thoughtful usage of the instrument can benefit you in verity of ways…
Have outlined my thoughts based on my limited knowledge & based on market research. Please feel free to highlight any major points might have been missed. I will try adding those areas in a separate article.