Amid the coronavirus lockdown, credit card spending fell by 51 per cent from March to April, according to a survey by CRED, a digital platform. The survey stated that the drop in card spending was due to suspended operations both in offline retail and online marketplaces during the lockdown.

With the lockdown having been lifted, top banks/lenders have seen credit card spends going back to the pre-lockdown level. Having said that, industry experts say that with pay cuts and job losses in the industry, people have turned towards instant financial relief. However, even though credit cards provide instant credit, using it in such times is risky.

With a credit card what you have to understand is that extensive use of your credit card can land you in a debt spiral. This will ruin your budget and also eat into all of your future income until the debt is cleared. Hence, using a credit card at such strained times is not at all advisable, however, if you have to use your credit card, do so only if you have the financial backing to clear the dues.

Using a credit card to fund everyday expenses is one of the most common ways to land a cardholder into a trap of revolving credit and long-term debt. Additionally, if you are using your credit card in case of an emergency, never use it to withdrawing cash, as it comes with several side-effects. Using a credit card for cash withdrawal attracts high charges. For instance, along with interest, the cardholder will have to pay cash advance fees, processing fees, and finance charges. Hence, it is not a preferable option.

Credit cards are known to offer an interest-free period, after which they attract high-interest rates that could go up to 36-40 per cent per annum as compared to a personal loan which comes at a much lower rate of interest of 11 to 24 per cent. Hence, to get out of a credit card debt, you can take a personal loan, with far less interest outgo.

Similarly, if you have already got credit card dues that you are not being able to pay, you can liquidate your investment to pay for that. This could sound a little strange but none of your investments can match the credit card debt that attracts 36-40 per cent interest. Hence, you can get rid of low earning investments or break fixed deposits to get rid of the credit card debt.

Credit cards are the best options for instant credit which is accessible anytime anywhere in the country, without any approval or documentation. However, not being able to pay the dues on time, and getting in debt affects your credit report.

Source:-financialexpress