Do you pay only the minimum amount due on your credit card bill? Can this lead you to a vicious cycle of debt trap? Paying the minimum balance against a credit card is an unintelligent financial decision. Why is it so?
Why should you pay an 18 per cent interest when personal loans are available at 13 per cent and gold loans at 14 per cent? Or take a loan against your provident fund at 12 per cent or partially withdraw you public provident account to pay off your credit card’s outstanding balance? Is it not foolhardy to pay 18 per cent to credit card companies by opting for minimum balance payment?
Credit card companies are happy with customers who go for the minimum balance option. This is because these companies charge an interest of 18 per cent per year, or sometimes even more. But how does this work?
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