Paying with a credit card is simple, right? Yes, because we’ve been doing it since the emergence of the era of the internet.
A credit card enables cardholders to borrow funds that can be instantly used at a time of crisis. However, if one doesn’t have the proper knowledge of the usage, he might fall into a debt trap, which could be difficult. Usually, people with improper financial management skills or one who borrows irresponsibly might get into trouble.
Keeping this behavior in mind, here are five types of people who should always avoid using a credit card at all cost:-
Untimely Bill Payers
Untimely bill payers are those people who do not pay their bills on time and most often miss their payments (usually due within 21-25 days since the last statement is generated). Hence, this unpredictable nature can cause one to face unforeseen circumstances in case of a credit card.
Therefore a cardholder might have to pay huge interest(ranging from 2-5% per month) depending upon bank to bank. For example, SBI charges 3.5% per month, whereas HSBC charges as low as 1.99% per month.
This reflects poorly on one’s credit report as their credit card score is reduced considerably (with damaged credit history, one will have trouble qualifying for a home mortgage, car loan, etc.). Hence, people with this kind of habit should avoid using a credit card.
Have you ever been into a phase where you buy things that you don’t need? Well, I guess the answer is yes. As we all know, a credit card gives us the freedom to spend. Therefore, absurd spenders are those who spend their money extravagantly without any second thought because of their spending pattern, and they might end up using a large portion of their available credit limit, which can affect the credit score adversely.
Usually, high credit usage portrays the user’s hungry attitude (potentially with a higher chance of default). Thus financial institutions might reject their application. Even though bank and credit card institutions nudge their customers to pay their unpaid dues on time to avoid late fees, the reality is that they want their customers to revolve their credit so that they can earn a significant profit on them (as interest).
Therefore, a person with an uncontrollable desire should never have a credit card.
People With Compound Source Of Liability
Have you ever encountered a person with multiple sources of income? There are different credit sources around us (such as money lenders, licensed banks, etc.). Sometimes, people might have more than one confidence (in the form of a credit card or personal loan account).
Not only do they accumulate a huge debt over some time, but they also end up being rejected by the lenders in the future, which further impacts their credit score. According to recent research, these kinds of people are sometimes forced to make a late payment.
Further, they end up with troublesome debt situations. Sometimes, having only two credit cards can also be a significant burden if you can’t afford to pay your bills; you don’t need it or plan to use it for some purpose. In some cases, getting a new credit card can improve your credit score by potentially lowering the total credit line utilization(card balance divided by card limit).
Getting a lot of credit cards in a short period is not advised. Hence, for these kinds of people, it is highly recommended to avoid credit cards.
People Under Age Or Careless People
Do you know? Lack of proper knowledge may lead you to a problematic situation. In the case of people under age, let us take the example of a college student who usually relies on a tight budget to hold onto a credit card and decides to spend it on a coffee shop, library, etc. They might end up having a severe case of bill shock by the end of the month.
This happens due to a lack of financial knowledge and immaturity. Therefore credit cards are not meant for people under age, which is why the Credit CARD Act of 2009 was implemented, which makes it harder for people below 21 years to get hold onto the credit card (without showing income proof).
Now, let’s talk about the second group of people, i.e., careless people, people who often misuse or misplace their cards, who often fail to put back their cards safely onto their wallet.
This might not be a big deal, but it arises when the card containing a PIN is erroneously disclosed due to a lack of attention or knowledge, which may lead to an unavoidable loss. Secondly, the CVV code is something to care for. You shouldn’t reveal your CVV number to anyone. Use this link (https://creditcardgenerator.one/cvv-number/) to know more about CVV code and its importance. Therefore, persons who are not cautious and careful in their monetary dealings should also avoid using credit cards.
Last Resort Of Credit (In Case Of Emergencies)
Credit card is meant to be used in case of a shortfall of a fund but, for people who use a credit card as a last resort (depends heavily in case of emergencies) might have to face a lot of difficulties because credit cards should not be your fallback in the event of an emergency. Instead, you should save up funds for emergencies.
It’s ideal to have three-six months of expenses saved up. Sufficient emergency funds will allow you to deal with any unforeseen circumstances that come your way without going into debt. However, people who are unable to save up for their emergency balance should highly avoid credit cards.
Anybody above 21 years can use credit cards. There is no such hard and fast rule for getting a credit card, but it’s one’s responsibility to self-check all the essential points before applying for a credit card.