Experts warn: 5 fundamental mistakes that cause credit card debt to rise

The rise observed in individual credit card debt in recent years stems from the spread of faulty financial management habits. Banking sector statistics show that missteps in payment strategies prevent the principal debt from decreasing. This situation turns into a chronic process known in the public eye as a "debt spiral" and often brings with it the risk of personal bankruptcy.

One of the most common mistakes is paying only the minimum amount instead of the full credit card statement each month. In this case, interest is applied to the remaining debt amount, which leads to the debt growing exponentially over time. Those who only make minimum payments for a long period may realize in later months that the debt has risen far above its initial amount.

Another common misconception is trying to pay off existing credit card debt by taking a cash advance from a different card. The high interest and fees of cash advance transactions can cause the total debt to quickly spiral out of control. The tactic of "paying off debt with debt" in this way increases the risk of economic collapse.

Failure to carefully manage installment purchases can also lead to imbalances in one's budget. With the accumulation of multiple small-amount installments, the total payment amount often exceeds monthly income. Financial advisors warn that monthly installment payments should not exceed one-quarter of an individual's net income.

Many users fall into the trap of viewing their credit card limit as a real increase in income. However, increasing a card limit disproportionately to income causes an individual to take on a debt burden that exceeds their ability to pay. This perceptual error, which sometimes goes unnoticed, increases the risk of payment difficulties and default.

Furthermore, the mismatch between the credit card statement closing date and the salary or income day is also considered a significant risk. Poor timing of expenditures can lead to a shortened payment period and liquidity problems. Such lack of planning can cause debt to fall into arrears and damage one's credit score.

Experts emphasize that avoiding these common mistakes when using a credit card is vital for financial stability. Paying the full statement balance and setting the card limit only in proportion to actual income can prevent individuals from entering a debt spiral.

News Source: 12punto