Credit Card-Essential or an Unnecessary Evil

Credit Cards can make our daily lives easy but have the potential of becoming a debt trap.
If you find yourself often in debt and making less than full payment on Credit Cards, stop and think. We all have debt and not all debt is bad. A car loan enables us to buy a car and a Personal Loan is handy to pay for a child education or an emergency treatment. The trouble begins when our debt at least equals or exceeds what we can afford.

The Debt Issue: Credit Card Companies/ Banks allow you to live beyond our means. They entice Cardholders with schemes like 0% installments plan, buy now pay later and the likes. While credit cards aren't the only way to spend more than you make, they are a number one enabler. The problem is that you usually don't realize what you’ve done until it is too late. It's hard enough to keep track of checking account spending, but add credit cards, and spending can get out of hand. How many times have you used your credit cards to buy clothes, impulse items or even groceries, and said you'll pay it back? But at the end of the month, you do not have enough money to pay the credit card bill in full.

Follow a few simple steps to get out of debt

1. It's not easy to stop spending more than you make. But it is possible. The first step in this process is to gather all your credit cards and destroy them. You can save one or two, but get rid of the rest. Just pick the ones with the lowest interest rates, good reward program and preferably no annual fee. Some of the good Credit Cards in the market are: Mashreq Etisalat Credit Card, RAK Bank Titanium Master Card, Etihad Guest Visa Classic Card, Citi Premier Miles Credit Card and Emirates Citibank Gold Credit Card.

Store your leftover 1or 2 Credit Cards in a safe place that is not easily accessible.This may seem extreme, but many people do not have the will power to simply not use the card.  They look at the available credit in the Card Statement and look at it as free money.  There is no such thing as free money. The idea is not to have them accessible for those impulse purchases that we come across every day.  Once we pass the moment, chances are that we will realize that we don’t need to make that purchase or probably forgot about it all together.  We are now even closer to getting out of debt. Consider a loan to consolidate your Card bills or do a balance transfer of the outstanding amount to one of your cards.

2. The second step is to create a budget. List all your bills and your expenses and see what you have left over. Do this every month when you get your salary. You have to know exactly how much money you have if you want to avoid spending too much. If you need to, sit and look at your bank account statement for three minutes every morning. Write down what you've spent the day before. Use easy tools like Monthly Expense Manager which enable you to record and keep track of your expenses.

The longer we go between looking at our budget and bank statement, the more we spend. When we know every day how much we have left, we are able to spend more frugally. But if we just assume that we still have x amount left, we get into trouble.

If you are a shopaholic, then there are ways to cut your need to spend. The number one way is to never step foot in the store. If you know that you will buy too much other stuff at Carrefour or Geant don't go there for groceries. Use the neighborhood grocery shops or explore going to the fish & vegetables market at Al Aweer or Diera. You will find fresh vegetables and fish available at unbelievable prices. If you want to go to Dubai Mall just to look, but know that every time you look, you spend 200 dirhams- don't go in. Enjoy the park and beach instead.

Another way to reduce that need is to go through what you already have. When you see how many things you already have, the need for more is lessened.
You know, everyone has lapses. If you have lived on 10,000 dirhams a month spending habit with a 6,000 dirhams income for a while, you may be used to juggling things and end up in debt. There are people out there that live comfortably on 5000 dirhams a month. There are others that make 25,000 dirhams a month and can't make ends meet. It doesn't matter how much money you make, it's how you use that money. By keeping close daily track of your income and purchases each month, you can make it on almost anything.

If you need specific help on managing your debt, write to us at expert@moneycamel.com

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