Credit card or take a micro loan?

Credit cards and microloans are similar in their availability. If you have a plastic card with an approved credit on your hands, you can pay it at almost any store or, if necessary, withdraw cash at the nearest ATM. If you decide to take a microloan, then in most cases, you will be approved of the necessary amount on the same day. And depending on the service, you will receive a bank card or cash on hand.

One and the second method of financing has its pros and cons. This article will describe the disadvantages of credit cards.

The fact is that today credit card debt is the most common type of debt in our country. 44% of Russians had credit card debt in 2016. For comparison, in 2013 this figure was 38%. This year the number of such debts continues to grow.

So why the percentage of Russians with credit card debt is only growing? There are many small reasons, but above all this is due to the easy availability and usability.

Credit card easily accessible

About ten years ago, credit cards began to be actively used in our country. This “plastic” was convenient for every solvent person. They began to enjoy with pleasure those who previously took one or more loans. And for those who believed that they could live without credit contracts, they liked credit cards because, having issued it, it did not commit anything. But there came a time when every plastic holder still began to actively use it.

Personal experience

Personal experience

As for me, 10 years ago, I told myself that I was groping for loans and would never use them. I did not understand why my acquaintances choose a TV, phone or computer, and then they sit in a queue to a bank representative in the store in order to issue another loan agreement.

At that time, I had a Sberbank debit card, to which my parents transferred me money to pay for housing each month. A few years later I received an SMS with an offer to issue a credit card with a limit of 10,000 rubles. A little thought, I came to the bank and got it. After six months, I learned that there was an interest-free period of 30 days and I decided that I would specifically use the card for purchases and pay off the debt until the end of the period. Thus, I gradually increased my approved card limit.

I made a correct assumption and in half a year I was doubled the limit, and a year later it was raised to 30,000 rubles. What was my pleasant surprise when, a few months before my wedding, I was increased to 50,000 rubles, and at the same time I did not have a penny of debt. To celebrate the wedding, I did not fit into the map, but I took it with me on my honeymoon and there I “gutted” it to zero. The trip was already four years ago, and I still pay monthly payments and are in arrears of more than 30,000 rubles. By the way, the limit was increased a few months ago to 90,000 rubles.

So, for several years I showed the bank that I can handle money correctly and know how to calculate my budget. And the bank, in turn, tempted me more and more, until I decided to use the funds on the card entirely.

I was given a card with a zero credit history and raised the limit year after year. Today, for issuing credit cards, banks have more stringent requirements than ten years ago, but they are still much softer than the conditions for obtaining a conventional loan.

When you make out a specific loan, the loan terms, monthly payments and interest rate are described in the contract. The first thing that can stop a person to take a loan is the realization that the debt must be fully repaid after a certain time. When you make out a credit card, it is very relaxing that there is no such thing as a loan term. In addition, you can not use the entire amount and pay interest only for that part of the money that you really use.

A credit card is convenient to use.

A credit card is convenient to use.

A credit card is always at hand, it almost always has a positive balance. Many make out a plastic card in order for it to be. So, just in case. And such cases occur several times a month, and then more and more often. You go to the grocery store and you do not have enough cash, you ended up in a shopping center and decided to have an unplanned snack or you liked the clothes you wanted to buy right now. All of us may have a variety of needs and desires that can satisfy the amount on the balance of a credit card.

Studies show that about 30% of cardholders spend money on ordinary everyday goods, such as products and goods for children. 16% use “plastic” to buy clothes and electronics. 12% spend on medical services. At 10% for home repairs and vacation. And less than 7% for the repair and maintenance of the car. People over the age of 65 admitted that medical expenses were in the first place in terms of the frequency of using a credit card.

Credit cards can be useful tools, being a kind of lifeline in difficult financial times.

Credit cards can be useful tools, being a kind of lifeline in difficult financial times.

However, task # 1 for each credit card holder is to pay off their debts as soon as possible. Ideally, to close the debt in three to four months, but it is simply impossible for many Russians. If you belong to this majority, focus on reducing your debt every month and in no way increasing it. Otherwise, the debt grows smoothly and with each year closing the loan seems impossible.

Becoming free from debt is a task for all of us, especially if you feel that your financial situation is improving. Life is unpredictable and at any time it may turn out that you will need a lot more money than you have on your balance sheet. If you get rid of debt, you can secure a “pillow” that will protect you if your financial well-being deteriorates dramatically.