All that begins well, Ends well. Hopefully!

The clock's ticking rapidly and its already the wee end of the year. Ledger books are out and credit card bills are piling up. What do you do now? Can you compromise spending this Christmas and New Year? As businesses, can you shy away from gifting your employees a small perk?

While having a credit card is surely a mark of one's financial success, it is a slippery slope that can get you into a serious financial tumble if the balance pay offs are handled loosely. The consequences are stark for both customers and businesses alike.

With so many enticing offers, bonus points, cash backs, free holiday packages, can a consumer resist the temptations? Of course not. The age of paper money is dying a slow death with the credit cards being the 'easy pocket cash' nowadays. So how does one become a responsible spender or Credit worthy business firm under the "plastic card regime"?

Just read on.

Research shows that people often end up spending more when they use their credit cards instead of cash. Professor Promothesh Chatterjee of the University of South Carolina calls this phenomena "the credit card premium". Just like a person absorbed in his new-found love is oblivious to future concerns, people who like to do that 'swish-n-swipe' act often don't realize the actual downsides of the purchases they make. While you might enjoy that momentary bout of euphoria when you manage to grab something good, unfortunately impulsiveness becomes a constant habit. What follows next is "Financial Stress".

To quote some interesting statistics here, on an average an American has at least 4 to 10 credit cards. What this means is that multiple accounts have to be kept track of simultaneously so that the credit card works when you have an urge to swipe it next time. Unmanageable financial obligations ultimately lead to borrowings from credit giving institutions. To say the least, to spend more one either has to earn more or else keep borrowing handsomely. But the road will end someday. Its a vicious circle indeed.

We share some C-facts here that will keep you going the next time you decide to take a rash plunge.

Credit Worthy Tips:

1. Just as CHARACTER is the defining thing for judging a human being, personal integrity of a borrower is 'THE' thing that a crediting institution looks for. Having a great business idea is just not enough; the real time turnover is what actually matters. A good loan interview reveals information that the customer doesn't even remotely realize matters. It is a secret character hunt by the institutions. So be careful on that count, it could cost you a lot if you mess up here. 

 2. COLLATERAL acts as a security to the loan borrowed based on one's bank balance, equity on home, land, stocks etc. So basically when one defers payments, the credit institutions take away what was offered by the customer. Its a 'carrot-n-stick' world folks.

3. CAPITAL is the net worth of the mortgage loan one is capable of repaying as well. Net income - all debts = disposable income. Logically, the risk involved becomes larger if the amount borrowed is equally high. Therefore, how much disposable income a borrower has becomes an important question in the context.

4. Added to all these, everything comes back to square One - repayment CAPABILITY. A right balance between debt obligations and sufficient cash to repay is what builds a good credit history.

All of this seems a pretty tough ask. While we don't exactly suggest an austerity drive but a spendthrift attitude will certainly not take you places ladies and gentleman. As they say "With Power comes Responsibility". So be a 'Head-on-the-shoulder' consumer this festive season.

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