In today’s world credit cards have become an indispensable part of life. The majority of the population especially in the urban areas carry out their day to day transactions through credit cards, be it grocery shopping, dining, making any costly purchase for their home or family, etc.
The main reason for the popularity of credit cards is the absence of the immediate need to pay in cash. Cardholders enjoy an interest-free credit period (usually 50 days) and have to clear their credit card dues as per the billing cycle.
Additional Reading: All That You Need To Know About Personal Loans On Credit Card
Loans against credit cards can be easily available to cardholders as compared to other loan products of similar nature like personal loans. However, cardholders have to be careful to not fall into a debt trap. It is when the cardholder is not able to pay the total amount due and keep paying the minimum amount to maintain the credit limit. The biggest disadvantage of credit card loans is the high-interest rate.
On average, credit cards charge interest of 3% to 4% per month which is 36% to 48% annually on the delayed payment of credit card dues. Personal loans on the other hand charge between 10% to 20% annually depending on the lender which is quite cheaper to credit card loans. also, the interest rate charged on credit card dues is at a flat rate on the entire amount due or borrowed as against the reducing balance method of the personal loans.
Hence, it is advisable to steer clear of credit card loans and explore other options like personal loans to meet the financial requirements.
Final Thoughts
Credit cards are an excellent alternative to using cash and meeting the financial needs of the cardholder while enjoying interest-free credit days. Cardholders can get a loan against their credit cards at a flat rate per month of 3% to 4%. Also, continuously making the payment of the minimum amount due will lead the cardholder to a debt trap which is a vicious cycle and difficult to break out from. Hence, it is better to avoid credit card loans and ensure that the credit card dues are paid on time.