Credit card usage increases significantly during festivals. This is due to special e-commerce schemes, extra discounts available on cards, and the excitement of the holidays. Reports indicate that credit cards are six times more likely to be used for online shopping during festivals than debit cards. This means that many people use credit to finance their festive purchases. Sometimes, these purchases become so significant that it becomes difficult to recover from the debt.
In such a situation, if you are also going to do Diwali shopping with a credit card, then let us tell you how you can avoid getting trapped in the debt trap.
How to avoid debt trap
1. Create a budget
Create an accurate budget before the holidays. Include estimated expenses for gifts, decorations, travel, and other expenses. Creating a budget can help you control your spending and avoid unnecessary expenses.
2. How to use a credit card
When using a credit card, make sure your spending is within your means. If you are using a credit card, make sure you pay in full on time to avoid interest.
3. Don’t fall into the trap
Paying only the minimum payment on your credit card bill increases your debt burden. If you take out a ₹50,000 loan and make only the minimum payment, it could take approximately 9 years to pay it off.
4. Avoid store credit cards
Store credit cards often offer attractive offers, but they can have high interest rates and hidden fees. It’s best to avoid these, as interest rates can exceed 30% if you don’t make timely payments.
5. Keep track of expenses
Keep receipts for every purchase and keep track of your expenses. This will help you understand where and how much you spent, and help you stay within your budget.