Is credit card a liability or an asset?

Definitely, a credit card is not an asset. It is a liability. Any purchase you make using credit card, you will have to repay the whole amount to the credit card company within a stipulated time period. That's not enough, there's still a lot of things to learn. Even though I have a credit card, I don't have any experience of using it. You probably wonder why I haven't used my credit card yet.

The reason of not using credit card is its various charges that I don’t know anything about it. I got the credit card just because of my excellent credit score that I made by repaying my loan on time. As far as I know, a customer need to submit documents like income proof, identity, and address proof for a new credit card. One of my friends told me about it. Thirteen years ago, he was employed in the marketing department of a Bank. His job was to make new credit card customers.

In fact I was not interested in credit card because of its hidden charges. I have heard several times before that most of the credit card customers fell into debt trap because of failing in repaying the used balance. I came to know about it very well after I joined a company eleven years ago. the main function of that company was to settle credit card debts. It was mainly operating in USA. It was completely online business. Generally most of Americans shop using credit card and fall into debt trap. If you make a search in google with “debt settlement” or “debt consolidation” key phrases, you will get several websites who provide debt settlement services. It was highly profitable business at that time. I don’t know what is the condition right now because I left the company seven years ago.

I don’t know how they get into debt. Either they don’t know the various charges of credit card usage or they use it excessively. Nevertheless, millions of people use credit card worldwide. I don’t want to mistake like them. That’s why I have decided not to use credit card until I know the complete charges of its usage.

In order to know credit card charges, I searched in google and found some useful info that a user shouldn’t ignore:

1) Annual fees on credit card maintenance: I am very much concern about this fees. I know my credit card is not lifetime free but I haven't used it yet. In this scenario what the credit card company will do I don’t know.

2) Cash withdrawal or cash advance fee: A credit card user can withdraw a part of his credit limit as cash advance for which the credit card company take some fees from the day you make the withdrawal. Most of the people suggest not to choose this option. It is highly chargeable. But I know people withdraw cash using credit card in want of money. However, you can do it if you think you are capable to repay it on time. I think it should be used in urgency. Otherwise, you must avoid it.

3) Fees for spending over credit limit: I don’t know whether a credit card company allow anyone to spend over their credit limit. I have read about it in an article that a credit card company may allow a user to spend over his credit limit depending on his credit card type. But it is not free. It is also chargeable.

4) Late payment fees on outstanding amount: If you fail to repay the outstanding amount that you have used in shopping within the stipulated time period, you will be charged some fees by the credit card company. However, they give you an option to repay a minimum amount but it is not a good option because they charge interest on the remaining dues.

5) Interest rate on the outstanding amount: I have already mentioned it above. Even you pay the minimum amount from your total outstanding amount, the company will charge high interest rate ranging from 33-42% annually on the remaining due amount. To avoid this hefty interest, you must repay the whole outstanding amount within the given time period.

6) GST (Goods and Services Tax): In my country, GST is levied by the government on all credit card transactions that include interest payments, the annual fees, and processing fees on EMIs. I don’t know, why these expenses are counted as Goods and Services.

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