Expensive Plastic

Credit cards are often called the most expensive piece of plastic due to their high interest rates and associated fees. While they offer convenience and benefits like rewards, cashback, and the ability to make purchases even when cash is tight, they can quickly turn into a financial burden if not managed properly. With interest rates often reaching over 35% per annum, along with various fees, credit cards can transform small purchases into large expenses over time. For many people, the cost of using credit cards can far outweigh the benefits.

It’s frustrating when something that seems so convenient ends up becoming a source of financial stress. This is especially true in markets like India, where the use of credit cards has surged. As of recent data, India has over 100 million active credit cards, reflecting a significant shift in financial habits. But along with this increase in usage, credit card defaults are on the rise too. CARE Ratings reports that defaults have climbed to 2.2% in September 2024 from 1.6% in March 2023. Total outstanding credit card loan dues in the country stood at Rs 2.9 lakh crore as of January 2025, up 13% year-on-year, according to the RBI. This highlights the growing concern around credit card management and the rising risk of debt for many consumers.

So, how can you avoid the high costs of credit cards and use them wisely? Here are some strategies to help you manage your credit card expenses and prevent them from becoming a financial burden:

1. Keeping your credit utilization below 30% is essential for managing debt and avoiding high interest.
2. Make sure you are fully aware of your credit card’s terms, including fees and interest rates. Understanding these details helps you avoid hidden costs and take full advantage of the rewards and benefits.
3. Paying only the minimum balance can lead to long-term debt due to accumulating interest. It’s best to pay off your full balance monthly to avoid extra charges.
4. Opening too many credit cards in a short period can lower your credit score because of multiple hard enquiries. Managing several cards can be challenging, so only apply for new ones when necessary and after weighing the benefits.
5. Avoid using one credit card to pay off the balance of another, as this can lead to a cycle of debt. This strategy may provide temporary relief, but it doesn’t address the root issue and can make it harder to get out of debt in the long run.

Take Control of Your Credit Card Spending
A Credit Card can be a helpful financial tool, but only if used responsibly. With over 100 million active credit cards in circulation in India, and defaults on the rise, it’s clear that many people are struggling with the financial consequences of mismanaged credit card use. By understanding your credit card’s terms, paying off your balance on time, and making smart choices about your spending, you can avoid the expensive trap of credit card debt. With the right strategies in place, your credit card can remain a valuable asset rather than a costly liability.