Skip to main content

Credit Card Trap

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

You must have heard of the quote "Rather go to bed supperless than rise is debt", by Sir Benjamin Franklin. This famous quote just gives an indication to the extent of troubles that one might invite, if debt is not managed properly.

 

One of the most common types of debt among our urban class is Credit card debt. Let's try to understand how one falls into the debt trap.

 

Sumeet, 26 had gone along with his friends for pre-Diwali shopping at one of the local malls and during the course of a few hours ended up blowing up a couple of thousands which was way beyond what he had planned for. All his purchases were done by credit cards as he did not hold that much cash in his account. When the credit card bill came in next month, he was comforted by the fact that he could make a minimum payment of close to 5% of the outstanding amount and pay the rest in the following month. Little did he realize that he would have to pay an interest on the outstanding at the rate of 3.5% per month (42% annulised). In the interim, Sumeet added a few more debts by purchasing some electronic items and dining at some of the posh restaurants with friends. Sumeet never saved enough to pay back the entire credit card debt and in a few months his debt and interest outgo reached such a level that he started skipping even the minimum amount due. The final nail in the coffin was when he started getting hounded by calls from recovery agents. Had it not been for his father who settled the entire outstanding with the credit card company, Sumeet's life would have become miserable.

 

Even young married couples too fall into the credit card debt trap and by the time they realize, it's too late.

 

How does one avoid this pitfall? There are 5 steps you can take to avoid landing yourself in such a situation.

o Maintain a monthly budget.

o Maintain a contingency fund

o Always use your debit cards

o Maintain a credit card only for emergency.

o Pay your credit card bills on time

Maintain a monthly budget

This is the first thing which should be done and followed diligently. Prepare a simple cash flow statement of inflows and outflows so you are aware of the possible expenses and surplus (if any) that is generated every month. If there are no surpluses then you can take a hard look at the possible expenses and try to rationalize them and generate surpluses for savings. This exercise will also help you to plan any high value purchases in advance.

Maintain a Contingency Fund

A contingency fund equal to 3 -6 months of your monthly expenses should be maintained in your savings account in order to fund for contingencies such as a hospitalization or loss of job. This fund will enable you to meet the unforeseen expenses and prevent you from borrowing.

Always use your debit cards

Usage of your debit cards will keep your purchases under check and you will spend within your means. You will be more disciplined towards your purchases and avoid falling into the credit trap.

Maintain a credit card only for emergency

Credit card has its own advantage too. Given a situation when your family member faces a medical emergency and has to be hospitalized at odd hours, you might not have access to cashless mediclaim or an ATM at that time. The credit card comes in handy in order to pay the initial deposit. But make it a point to pay back the amount within the first payment cycle.

Pay your credit card bills ontime.

Please remember the credit card debt is the most expensive debt among all categories of debt. The annualized percentage rate can be as high as 42 %.Most of us fall into the credit card debt trap when we fail to pay the credit card outstanding bills and continue paying the "Minimum Amount due". This results in the company slapping us with late charges penalty and interest on out standings.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now