Credit card debt is not always bad debt. Credit card debt occurs when you use your credit card to pay for services and goods, then have to pay back the money spent, plus interest (if any), to the bank that issued the card. This is completely normal and legal, and if you manage your credit card debt well, it should not cause any problems.
Credit card debt only becomes bad debt when you cannot pay on time or do not pay the minimum amount required by the bank. When you are overdue, the bank will report your bad debt status to the Vietnam National Credit Information Center (CIC). CIC will record and rate your credit.
Bad debt can negatively impact your ability to borrow money in the future, damage your financial reputation, and can lead to bank actions such as credit card repossession, fines, and even lawsuits.
Illustration: Topi.
There are many reasons why credit card debt becomes bad debt. Some people spend beyond their means, do not calculate carefully and get caught in a spiral of debt. Others encounter unexpected financial difficulties such as job loss, illness, or accident that leads to not being able to pay their debt on time. Whatever the reason, letting credit card debt become bad debt is not desirable.
To avoid credit card debt becoming bad debt, there are a number of steps you can take.
- Control your spending. Before you make a purchase, consider carefully whether you really need the item and whether you can afford to pay for it when it comes due. Don't spend beyond your means.
- Pay your credit card bills on time and in full each month. If possible, try to pay the balance in full to avoid interest. You can set reminders or use an automatic payment service to make sure you don't miss a payment date.
- Build a financial reserve fund. This fund will help you deal with financial emergencies without having to rely on credit cards, thereby reducing the risk of bad debt.
- Regularly check your credit card statements and credit reports. This helps you detect early signs of bad debt and take timely corrective measures.
Source: https://vtcnews.vn/no-the-tin-dung-co-phai-la-no-xau-ar913186.html
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