The correct use of a credit card is therefore so important so that you do not lose track of your finances. Especially in our modern times, paying with a credit card is part of everyday life. Buying now and paying later has already led many consumers into debt. No matter whether it is used to pay for weekend shopping, holidays or car rentals, the small plastic cards are always at hand and not infrequently lead to debt traps. That’s why the correct use of a credit card is very important so that you can pay all your bills.
The correct use of a credit card prevents the debt trap
Credit cards have both advantages and disadvantages. With a credit card you can not only pay comfortably on the internet, but also use it for spontaneous purchases. Many of these cards have a payment date. This means that the purchase is only debited from the current account later. If the current account does not show any cover, the consumer uses the credit card to obtain liquidity that is not available. Those who do this frequently can get into debt very quickly. If the account is then completely overdrawn, the first signs of overindebtedness such as return debit notes or chargebacks due to insufficient funds in the account become apparent.
Our tip: Before you have to deal with returned direct debits, you should talk directly to your bank. Other solutions can often be found so that you do not incur unnecessary costs. Even if unforeseeable situations arise, such as losing your job, you should contact the bank. A bank can only help you if you openly seek the conversation!
Payment by instalments of the credit card balance can lead to over-indebtedness
The correct use of a credit card offers the consumer two ways to pay the outstanding credit card balance:
- The balance on the credit card can be paid all at once or
- the open invoice can be paid by instalments
It should be noted that an instalment payment is often subject to very high interest rates. The amount of interest is equivalent to that of an overdraft facility and can be up to 20% in the worst case.
Decide on the right credit card
There are four major credit card providers. These include
- VISA and
VISA and Mastercard are provided by banks. VISA, for example, comes from the Berliner Landesbank. Credit cards are available in different versions and services. You can choose between standard, black, gold or platinum. Depending on which provider you choose, there are additional services and bonus programs. With such a large selection of credit cards, the correct use of a credit card should always be considered. Classic credit cards are often only issued to the consumer if they are considered creditworthy. To determine the credit limit, the creditworthiness of the customer is checked. If creditworthiness is poor, a prepaid credit card can ensure that the customer can make cashless purchases.
Various tips to avoid the credit card debt trap
In any case, cash should come first. Those who pay with cash have a much higher inhibition threshold to shop than with a credit card. Therefore, the correct use of a credit card should be an occasional alternative when shopping. It seems sensible to keep the receipts from credit card bills and take a look at them from time to time.
This way you always know exactly how your account looks like and you will not experience any unpleasant surprises. To protect against credit card misuse, you should keep your card and PIN separately. If it is found that you are living beyond your means with a credit card, it is better not to use a credit card. An alternative is a prepaid credit card. With it, the correct use of a credit card can be virtually learned.
Buy now – pay later with the Revolving credit card
If you make purchases with a normal credit card, your account will be debited with the outstanding amount at the end of the month. With a revolving function, a fixed rate is debited at the end of the month. The customer can take up to one year to pay the remaining amount. However, high interest rates are charged. An interest rate of up to 20 % is not uncommon. Consumer protection agencies therefore advise against this credit card function. While credit cards can be useful, the revolving credit card is not recommended.
The right way to use a credit card – avoiding the debt trap
The correct handling of a credit card must be learned. Those who engage in impulse purchases suggested by advertising often buy far too many products that they basically do not need. It is not unusual for the filter paper for coffee to turn into a full truckload. As it goes to the end of the month, the account is practically empty. If you use your credit card in such situations, you are quickly in debt.
If you pay cash, you often put products back because a glance into your wallet signals something else than buying. If you have several credit cards, you should always use the cheapest one. If you are not going on holiday, a simple giro card is sufficient, where the amount is immediately debited from your account. In this way you will learn how to use a credit card correctly.
Conclusion on the correct use of a credit card
The correct use of a credit card does not necessarily lead to the debt trap. If you handle your credit cards as carefully as you handle cash, you will avoid a debt spiral. Of course, there are situations where one has to take out a loan. One thinks here of separations or other strokes of fate. Nevertheless, the expenses must not disappear from view. Then the correct use of a credit card can be more than useful. If you are already in the debt trap, you should contact a debt counselling service. There a debt settlement plan can be drawn up for existing debts. Consumers should know that the correct use of a credit card can be learned. However, a credit card is particularly useful on holiday, as it is often recognised not only as a means of payment, but also often as a deposit for hotels.