Credit Cards

Credit Cards – Boon or a Bane? – Part 2

Author:  Nadeem Syed – Banker
Nadeem Syed

This is second and final part of the series written by Nadeem Syed – our Banking Advisor.The part 1 explained the Background and some key features of a Credit card. This instrument of convenience can make life easy, however, used recklessly, could certainly result in a potential calamity, waiting to happen. Can we avoid it? Read to find out.



The temptation

One often talked about disadvantage of a credit card is the risk of overspending. A thing to remember, at the end of the day, the money spent through credit card has to be repaid. A momentary good time today should not become a precursor for a financial crisis tomorrow!

Undeniably, huge advertising budgets on Credit cards marketing by the Credit card issuers fuels the urge to spend. New card features, flashy ads and promotion schemes are very tempting indeed. Ultimately, it’s your money and your pocket that pays up. Cost versus the benefits must always be measured. Ask a financial expert if you are unable to work out the pros-and-cons.

Signs of Distress and Pitfalls to avoid

The following could indicate potential signs of financial trouble.


Ideally there should be a healthy movement in the Credit card outstanding balance. This means that the balances should come down to lower levels every few months.

Typically if there is a freeze in the outstanding balance of the credit card,whereby it’snot reducing below atleast 50 to 60 percent of its limit for more than six months, it could be apotential sign of trouble round the corner.

Avoid direct cash withdrawalson Credit card, if possible, as these tend to be expensive and could attract extra charges. With increasing number of vendors, web stores and shops accepting Credit card there is hardly a need to avail a Cash advance facility via a card.

Limit the number of credit cards. In this part of the world there is always enticement of easy credit via ease of availability of fancy credits card with all the frills and thrills. Yet one could always be led into a debt trap. Keep at best not more than two cards. An ATM or a Debit card can always be a wise substitute for a Credit card when going for shopping without hard cash.

It’s also preferable if standing instructions are given to your bank to debit the account every month directly to avoid missing out on credit card payments.

Regular monitoring of your bills would certainly go a long way to avoid getting into a debt difficultly.

Don’t feel shy to ask your banker. Even in today’s sophisticated and automated environment, no one in infallible. Mistakes and errors are possible. It’s your right to ask and clarify.

If due to some misfortune,if a person lands up in Credit Card trouble, there could still be hope and some solutions are possible. It’s best to talk to financials experts with a candid disclosure of the financial position and discuss work-out planfor the monetary obligations.

Ending Note:

Our team has extensive experience in this field with expertise in legal and commercial matters and can advise persons who may be in financial distress due to credit card obligations.