Most of us who are employed are often faced with cash crunch at the month end. The amount that was credited in the beginning of the month seems to have vanished without a trace yet some expenses that cannot be postponed continue to stare at us. Well if you seem to think this is an all too familiar situation we have some useful information for you. Credit cards can come to your rescue in such situations of cash crunch, let’s see how?
Credits Cards to the Rescue at Month End:
So you are in the last few days of the month, your bank account is depleted but you need to buy a few things, so what do you do? Well, the credit card is here to your rescue. Since credit cards unlike debit cards are not linked to your savings account, so regardless of what your savings account has in it, they can be swiped to pay for whatever you need to buy.
The amount that is spent needs to be paid in the next billing cycle which means that you can wait for your salary to be credited in the next month and then you can clear your dues. So whether its groceries, an unforeseen expenditure or doctor visits, the card can help you make the required expenditure without having to borrow from anyone or dipping into your savings.
If one is looking at making a big ticket purchase and they find themselves cash strapped then also the credit cards can be of great service. This may happen at the end of the month when you have already exhausted your finances or otherwise too. In such a scenario it is good idea to convert the big ticket spending into an EMI.
This will just work like a normal loan; the borrowed amount attracts interest on it. The dues are repaid every month in the form of an EMI; there is a principal component and also an interest component in the EMI. So if you want to buy something expensive or there is an emergency that requires a big outlay and you cannot wait for your salary to be credited in the next month then your credit card can help you deal with the cash crunch.
A Word of Caution……
Above we discussed how a credit card helps you deal with your cash crunch at month end; however this comes with a word of caution. The first aspect that you need to ponder on is; is this something that happens once in a while or is it sort of a norm. Do you often find yourself cash strapped at month end? If yes, then you need to budget you expenses better. Over dependence on your credit card is not good for your overall credit health.
Remember whatever you spend on your card needs to be repaid in the next billing cycle. In case you fail to do so not only are there heavy penalties involved, it can harm your credit score too. Similarly a high credit utilization ratio also impacts the credit score negatively. If it is once in a while then credit cards offer a great convenience but it should not be a habit that you overspend on your card at struggle to repay the dues in the next month.
When converting expenditure to EMI, then also keep in mind that just like a car loan or a personal loan EMI this also attracts interest and has to be repaid every month. Plus borrowing on your card will reduce your credit limit so you will have to bear that mind for all future billing cycles.
Being over dependent on the card is expensive (credit card debt is the most expensive of all debts), it can push you in a debt trap and also harm your credit score.
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