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Is Credit Card Destroying your Wealth

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Coding Defined
@codingdefined
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We all (almost everyone) love to spend money to buy something or the other be it clothes, latest gadgets, vehicle or even spend on food. Now to able to do all the spending we all wait for the salary to get credited in our account, or withdraw it from the business if we have one.

Salaried people like me become ecstatic when we see a message like
"Account No. XXXX credited with Rs. XXXXX on 01-06-2020. Available Balance: Rs XXXXX" on starting of the month. It gives a feel of richness to you, but your happiness does not last longer why because you get a few more messages like :

  1. Due Date of Car Loan EMI - 02-06-2020, Amount: XXXX. Please ignore if paid.
  2. Due Date of Home Loan EMI - 03-06-2020, Amount XXXX. Please ignore if paid.
  3. Total Amount XXXX and Min Amount XXXX is due by 05-06-2020 on your credit card XXXX. Please ignore if already paid.

PC: Pexels.com

You know which among these 3 messages hurt the most, that is Credit Card bill because that bill amount was in your hand. You will feel confused about why you got such a high bill. Then you go through the statement and you will able to see where you have actually spent the money. These all things combined (Credit Card Bill, Home and Car Loan EMI) can take 30-70% of your salary depending on your EMI amount and thus you are left with less than 50% of your salary to manage your household expenses.

Now the stress starts to take advantage of the situation because you have a very little amount to manage home expenses. Then you might have other expenses too, like Netflix Subscription, Fuel, Groceries, Electricity and thus you don't have anything left after say 10 days of receiving the salary.

Say after 10 days you wanted to buy something or go out to party, you know what is your saviour, that Credit Card which you have in the pocket and the increased limit which you have opted for. You start spending again thinking that next month will be ok. And the cycle continues months after months and years after years to find out that you have little to no savings left with you. We all promise at the start of the month to not spend too much via credit card but we cannot stop ourselves from spending. We as a human being trying to convince our inner conscience that next month will be better, but next month never comes. Is it because we have a Credit Card or because we cannot just stop buying?

PC: Pexels.com

You know how you can you come out of this situation is by removing the Credit Card from the scenario. The promise which you want to keep off not spending can only be achieved if you keep aside your Credit Card for 2-3 months. The problem is actually not about you and not about having the Credit Card only the problem is actually the Ecosystem we are in like Credit Card Offers with no annual cost, Pre Approved Loans, Easy EMI and what not. Do you know nothing comes for free and thus eventually even if you try to grab these offers you will always be in loss because these companies know who to get money out of a common man?

Along with that since now earning money is not that difficult which used to be like 20 years back, now everyone with an internet connection can make money and thus the priorities get changed. Previously your parent's priority would have been Children's Education, Buying a House, Retirement, Child's Marriage etc but now I can see the priorities are getting shifted to Vacations, Children's Education, Upgrading lifestyle, Starting Business. We usually (actually young generation) does not take retirement as seriously as one generation used to do. And thus Credit Card plays a big role out here which gives access to lots and lots of money for individuals to get their priorities.

PC: Pexels.com

Again, I use Credit Card too but I spend only 10% of my Credit Card limit in a month only to get rewards and benefit from it. So using a credit card is not bad at all but using it without overstretching yourself seems to be a mechanism of destroying the wealth you have. When I wanted to buy a Bike, I could have bought it using Credit Card or taking Auto Loan but I waited for 3-4 months to save the money and then get it, why because waiting for 3-4 months was worth it as I did not pay a lot for interest. But again this is not always applicable, you have to take loans for marriage or house if needed. For that, it's always better to get the best possible interest rates.

Use Credit Card efficiently is what I think can help to save little more and thus which will help you to accumulate the wealth.