Credit Card – do I have the freedom?

Credit Card

I still remember the day, final month of my post-graduation, and we have these credit card chaps standing outside the gate. As would be, I went ahead & applied for the card 😉

My job is three months away, and here I have this plastic card, which gives me the freedom & cash, and within no time, I used up 50% of my limit, without any income in hand. All in the premise that first series of pay, I will knock off the outstanding.

Start of my Job, and again in no time, I guess 6 months, I am running an outstanding of more than 2 lacs and major portion of my salary goes in part-payment, with a fat interest. Each month I commit myself on reducing same, which happens to some extent… but this cycle never stops.

For next four years this cycle continued, where I would have payed these credit card companies, more money in interest than the actual outstanding. Finally, one day I took the courage & took out my scissors, & chopped the card into pieces.

Though after some time, I applied for a credit card again… Not for availing the credit, but towards cash-less payments. I have not paid any interest since then, as I repay my entire outstanding every month now.

Let me now highlight two dangerous points on credit card:

High Interest Payment:

Usually, this is upward of 36% annually or 3% every month on outstanding amount. Say for instance, you have an outstanding of 50k, you have to pay 1500 as interest, for the month.

Best way to explain; if you give money to bank, towards FD, they will offer you 6% to 9% annual interest. But on credit card, they will charge you 36% or higher… it’s a criminal waste of money.

What’s the way out; either delay your purchase & save, or if it’s a must requirement, take a personal loan, which should come around 12% to 16%, based on your salary, ITR & duration of employment.

They block you from pursuing other Goals:

We are earning & saving money for our dreams or future goals, like buying a car, house, kid’s education, retirement, etc. By using credit card, paying part payments, which includes interest cost, you are in-short delaying your savings & future goals.

It’s a known fact; that early saving rewards you with higher returns than late savings… Power of compounding works better for long duration. Read my blog – Link.

If credit card is so bad, what is it good at:

Cash-less working:

Credit card helps you transact, offline & online without cash. You don’t have to bother about withdrawal or deposit of money today. Even your utility bills & household payments can be done thru the cards easily.

Emergency funds:

Credit card comes handy, or acts as a hedge towards any emergency or unplanned requirement of money. You have a preapproved limit and same can be used, whether to transact or even withdraw, when the requirement or emergency strikes.

Finally, it’s all about your discipline on your spending or when to use. People say, they don’t have control when they have card, and end up spending more. My logic is all about having a discipline. If in case you cannot control your urge, use debit card instead.

Happy Savings!!!

Manoj Chahar
Founder & Storyteller at
Manoj is the founder of, with 15 years of corporate experience & expertise in financial markets. Manoj has corporate stints with Kotak Securities, IIFL group & Philips India. He holds an MBA (PGDM) degree from Symbiosis (SIMS) Pune.
His interests include birding & adventure activities.

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